Women & Retirement: Don't Wait, Start Saving Today

Poor and alone isn’t the retirement any of us dream about. And the following statistics conjure up some very scary images:

(Sources: Dee Lee’s Everywoman’s Money: Financial Freedom; Social Security Administration.)

  • More than 50% of all marriages fail.
  • After a divorce, the average woman sees her standard of living drop by as much as 30%.
  • The average age of widowhood is 56 years old.
  • The average woman lives to 80. (The average man, age 74.)
  • The poverty rate for elderly women is twice that of elderly men.

Fortunately, it’s never too late to start investing or to invest more!

Of course, the steps you need to take to ensure that you have enough money during retirement depend, in large measure, on your current age and situation. Here’s a breakdown of some things to consider, depending on just how long you have until retirement.

Gen X

As a group, younger women tend to be savvier than their older sisters about managing their money. And that’s a good thing because getting an early start is half the battle. During your younger years, the key is to save whatever you possibly can. That’s because the magic of compounding becomes all the more powerful the longer your time horizon. Consider this: If you save money throughout your 20s and then quit saving at 30, chances are you’ll come out dramatically ahead of someone who starts saving in their 30s and contributes for twice as long.

Baby Boomers

Perhaps, surprisingly, for a generation of women who accomplished so much in the workplace and in politics, boomer women are less in charge of their financial lives than their younger sisters.

Older baby boomers are starting to set their sights on the end of their working days. But for many women of this generation, early retirement isn’t a likely option. In fact, many will have to work longer or even take on a second job to make up for years of poor retirement savings.

Recognizing that many people are nearing retirement unprepared, the government is making it easier for them to save. Folks aged 50 or older will be able to make slightly higher contributions to their IRAs via “catch-up” contributions of up to $6,500 in 2014. Increased contributions will also be permitted in 401(k) accounts. This might not sound like a lot, but over several years, it can make a big difference.

Divorcées and Widows

One issue that can affect women of any age is divorce. When Prince Charming turns out to be more toad than prince, many women feel unprepared to manage finances on their own.

While nobody wants to assume they’ll wind up getting divorced or widowed at an early age, the fact remains that you need to take personal responsibility for making sure you have a comfortable retirement. With a bit of planning, it shouldn’t be too hard. By saving more now, you’ll free up time during retirement to focus on the things that really matter, like showing your granddaughter what being a happy old lady is all about!

So how much will you need to retire?

That depends. A quick rule of thumb is you will need 80% of your pre-retirement income in order to live comfortably. For others you’ll need more — that is, if your idea of retirement involves more than shuffleboard and a rocking chair!

Recommended reading: The Random Walk Guide To Investing by Burton G. Malkiel