Most retirement savings advice can be beneficial to anyone, no matter their sex. But, young women, in particular, need to start early in creating their retirement plan.
Why?
Recent research by the National Institute on Retirement indicates that women ages 65 and older typically have incomes 25% lower than men, and as men and women age, men’s income advantage widens to 44% by age 80 and older. Because of this, women are 80% more likely than men to be impoverished by ages 65 and older, and women ages 75 to 79 were “three times more likely to fall below the poverty level.”
Jennifer Streaks, money and lifestyle expert, offers ways young women can change these statistics and be proactive–and realistic–in planning how they will live out the golden years of their dreams:
1. First, Determine Exactly What Retirement Truly Looks Like for You
Self-assess and ask the important questions. “What type of life would you like to have in your late 50s, 60s, 70s?” Streaks says. “Do you love experiences over things? Do you want to quit, and have the option to do nothing but relax? Do you already have medical expenses, such as eyewear, physical therapy, fitness, or prescriptions that might carry into those years?”
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2. Get Your Side Hustle On
“Look at retirement savings as a pie. There are three slices: investing, personal savings, and income from a small business or side hustle,” Streaks says. “So many millennials are now starting side businesses or becoming entrepreneurs. They’re also not staying at jobs for 10, 15, or 30 years, in order to get a pension or a fund of that nature.”
Streaks also adds that a side hustle or any money-making activity you can do part-time, such as freelancing or consulting, is great because it brings you “another level of income.”
“I have a friend who works a full-time job, and has a side business. Last year, she brought in an extra $29,000,” Streaks says. “If you can do something that’s sustainable and that you love today, it can be a great avenue for funding your retirement later.”
3. Scale Your Savings Goals and Be Flexible in Adjusting How You Save and What You’re Saving For
Streaks recommends setting short-term goals and focusing on those. This could include building up a rainy day fund or saving up six months to a year’s worth of living expenses to cover you, in the event of a financial emergency. Once you reach those goals, shift your savings for the long-term goal of retirement.
“It’s all in how you allocate your savings. Set up those automated drafts, where a portion of your paycheck goes to a savings account, with a specific purpose and goal amount,” Streaks says. “As you get older and become more financially stable, you can continue to re-allocating and saving for retirement.”
Also, when you get a raise, you can act like you didn’t. “Budget like you did when you made the lower salary, and save the difference, or take a percentage of the raise for yourself–as a reward–and put the rest toward saving for retirement,” she says.
4. Be Proactive and Ask Your Financial Advisers and Retirement Fund Administrators the Right Questions
“That 10-year window between 25 and 35 is a period where you can be the most aggressive with your investments. You
have extra money to invest in stocks, but be aggressive in the stocks you choose,” Streaks says. Also, when it comes to an employer-provided 401k, Streaks urges young women to ask employers to match their contribution, even if working for a startup.If you’ve consulted with or hired an adviser, ask about fees and risks associated with your investments. “You don’t want a large percentage of your money going toward fees that advisers can sometimes charge,” she says.
“Also, ask if stocks and other investments in your plan seem vulnerable. If something starts to happen with your investments, what will [your adviser] do to minimize your risk? Make sure you’re working with someone who is going to be monitoring this, and that you don’t just have your money sitting there with no one on top of watching your investments.”