Women and retirement: What you need to know

Women have made remarkable progress in the workplace over the past few decades. Currently, more women graduate from college than men; women also make up more than half of the management and professional workforce. However, women continue to face financial challenges.

Even when working in comparable jobs, women earn less than men. Overall, women ages 20 to 24 earn 92 percent as much as men; for women ages 55 to 64 that number is 76 percent, according to a 2016 report by the American Association of University Women. 

Women are also more likely to work part-time or interrupt their careers to care for family members. And women more frequently prioritize other goals, such as paying for college, over retirement savings. All this can combine to create savings gaps.

So how can you plan accordingly? Here are seven things to know when it comes to women and retirement.

1. Life spans are increasing

Women’s retirement savings must be able to cover extra years of expenses and health care costs. When making retirement savings projections, take your potentially longer life span into account.

On average, women outlive men by about five years. Women: 81 yrs. Men: 76 yrs. Source: Centers for Disease Control and Prevention, 2015.

2. Women have less money saved than men

On average, women have less saved in their retirement accounts than men. Since women are likely to live longer, this could become a problem. One way for women to make sure they don’t fall behind is to prioritize contributing to retirement plans.

Average IRA balance. Women: $96,339. Men: $160,589. Source: Employee Benefit Research Institute, 2015

3. Saving early can make a big difference

Women should start saving and investing as soon as possible—the earlier you begin saving and investing, the more time your nest egg has the potential to grow. Setting up automatic deductions from your paycheck to your 401(k) plan is a great way to make investing second nature. If your company offers a match, try to contribute as much as you need to capture the full amount. You can also set up automatic transfers from your bank account into an IRA. Explore your IRA possibilities, including an FDIC-insured savings IRA through Bank of America or an investment IRA through Merrill Edge. 

Savings at age 65. Contributes $3,000 annually from 31 to 45, then makes no additional contributions: 31: $45,000. Savings at age 65: $180,351*. Contributes $5,000 annually starting at 46 and continuing to 65: 46 — 65: $100,000. 65: $186,863. *This is for illustrative purposes only and assumes a hypothetical 5% annual return. Annual returns will vary.

4. Explore other investments

If you don’t have access to a workplace retirement plan, or even if you do, you may want to consider other types of retirement accounts. If you have earned income from working, you can establish your own IRA. If you do not work outside the home but are married to someone who does, you may be able to contribute to a spousal IRA. Or if you’re self-employed, consider a solo 401(k) or SEP IRA. These accounts can help expand your investment opportunities.

5. One-time cash infusions are opportunities

To reach your financial goals, look out for unexpected opportunities to put more money into your retirement accounts. If you get a bonus, tax refund or inheritance, contribute a portion to your retirement savings. These extra contributions can help accelerate your progress.

6. Investment approach is important

While a conservative investment strategy minimizes some types of risk, it can backfire if your investment returns don’t at least keep pace with inflation. A more aggressive strategy might lead to greater returns over a long period, but it has risks, too. You can’t be sure of earning a steady rate of return, and you might even lose money, so make sure you understand the risks before you begin an investing plan.

7. Questions lead to answers

Women tend to be less confident than men about their financial skills. This isn’t necessarily a bad thing; having a measured sense of your abilities may mean you’re less likely to make rash or uninformed decisions. However, don’t use that discomfort to detach. Remember, you can get more confident by keeping the conversation going and asking for answers that help you gain clarity. Empower yourself by learning more about women and retirement at Merrill Edge. 

"I know less than the average investor about financial markets and investing in general." 55% of women agree. 27% of men agree. Source: Merrill Lynch, 2013
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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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