Women face special challenges in preparing for retirement
In many ways, women in America today face more significant challenges in saving for their retirement than do men. That was the underlying theme of a keynote address at a recent conference of the Women’s Inter-Cultural Exchange in Charlotte, NC, (WIE) by Teresa Hassara, senior managing director of Institutional Client Services for TIAA-CREF.
Women typically cope with too many things to do and not enough time — everything from full-time work to childrearing to eldercare support. Many also keep their households running, which includes managing expenses, Hassara said. “In fact, the number one reason they cite for not being on top of their personal retirement plan or investment strategy is simply not having the time to devote to these activities.”
But for some women, Hassara suggested, there’s another issue at play relating to identity and roles. “Investing and retirement planning have traditionally been seen as a man’s responsibility,” she said. That should no longer be the case.
“Just as with your health, no one will ever care about your financial fitness as much as you do. After all, you don’t want to run out of money before you run out of life,” Hassara cautioned.
Given that mortality tables have women living years longer than men and that some studies suggest as many as 40% of women (divorced, widowed or simply single) will be living on their own at age 65 and beyond, the comfort issue with planning is something that women need to address.
“It’s a gap. Hassara said. “But we can close it, just as we’re steadily closing others — from pay to education levels. There’s no reason we can’t be every bit as effective at understanding our financial options as men — for the sake of ourselves and the families we love.”
Hassara recommended that women do the following, based on their age:
- If you are in your 20s and 30s: Make sure you’ve signed up for your retirement plan if your employer offers one. Contribute at least enough to get any match available. It’s essentially free money. Also save a set percentage of your income, rather than a fixed dollar amount. As your income rises, so too will your contributions. Remember that these early savings — when retirement seems so far away — pay off the most over the long term because of the power of compounding.
- If you are in your 40s: Keep increasing your savings rate, even as you juggle family and eldercare responsibilities. At this point in your life, between your savings and your employer’s match, you should be setting aside 15% of base pay for retirement.
“One woman asked me whether she should stop saving for retirement in order to plow money in a college savings fund for her son,” Hassara said. “I told her that she could always borrow money for college, but she couldn’t borrow for her retirement.”
- If you are in your 50s and 60s: You are heading into the all-critical years leading up to retirement where you may have the greatest discretion and the greatest opportunity to save the most. This should be your peak earning period and you should increase your savings to the maximum.
“At all three stages, make sure you are actively engaged with your finances. Talk to your financial advisor, accountant and lawyer about all the options available to you,” Hassara recommended. “It is your money, after all. Seek the advice of a professional you trust at least once a year. Understand how that advisor makes his or her money. If the advisor charges a fee, understand how much it is. Fees can add up quickly — and that’s money that isn’t going into your retirement account. Great advice is certainly worth the cost. Just know the cost.
“Also begin to build your own expertise,” she concluded. “There are loads of good books available as well as blogs online. Every financial services firm offers a wealth of educational information on its website.”
WIE was founded in 2005 as a non-profit organization which seeks to build and bridge social capital among women of diverse cultures, foster cross-cultural awareness and develop the infrastructure for community dialogue, engagement and programming in the Charlotte metropolitan area. TIAA-CREF worked with WIE and Queen’s University of Charlotte to host “The Financial Outlook for Women Across Race & Culture in Today’s Economy” on June 6.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.