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Women Lag in Retirement Savings: These Options Can Help Boost Nest Eggs

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SmartAsset: Women Lag in Retirement Savings. Two Options Can Help Boost Nest Eggs

According to a new study from Goldman Sachs, half of all women say they’re behind in their retirement savings when compared with men. This shortfall adds to the financial double-whammy that women already face as a result of lower pay rates and longer lifespans. Here’s a breakdown of what the study says and two ways women can catch up on retirement.

A financial advisor can help you create a financial plan for your retirement needs and goals. 

The global investment bank’s new study, “Women & Retirement Security: Navigating the Financial Vortex,” says that eight out of every 10 retired women report a total annual income that’s less than 70% of their pre-retirement income.

As a rule of thumb, financial planners recommend aiming to maintain 80% of your pre-retirement income when you are retired.

The study also finds that women are more likely than men to retire earlier than planned. Over 60% said they retired earlier than planned and 66% said they “retired for reasons outside of their control.”

“Not reaching one’s desired retirement age reduces the amount of time available to save for retirement and can place added pressure on those savings to last longer than expected,” the Goldman Sachs study said, with the majority of women respondents likelier than their male counterparts “to retire early because of external factors like health and taking care of a family member.”

Two Other Factors Impacting Women’s Retirement

SmartAsset: Women Lag in Retirement Savings. Two Options Can Help Boost Nest Eggs

In addition to early retirement, women face two other factors that are impacting their retirement savings:

Systemically lower pay rates. In 2020 the Pew Research Center found that women earned on average 84% of what men earned, with four out of every 10 working women reporting that they were paid less than men in the same job.

As with time out of the workforce, this leaves women with less money to save and invest for retirement and also lowers their Social Security benefits.

Longer lifespans. In 2020, the U.S. Centers for Disease Control reported that the average American man can expect to live to age 76, while the average woman gains another five years (living to the age of 81).

Longevity obviously means that workers will have to save more to pay for a longer retirement. And with the Goldman Sachs study also showing that women are leaving work earlier due to health and caring for a family member, a longer life span and shorter work period will pose a double challenge.

Moves That Can Help Women Increase Retirement Assets

Here are two common financial moves that can help women boost their retirement savings:

Work with a financial advisor. The Goldman Sachs study shows that women respondents “are anxious and concerned about their ability to save for retirement,” but almost 70% manage their own savings. The study also reported that while women are using this self-directed approach, “this does not reflect their desire for help and advice, which is higher than reported by men.”

Financial advisors can generally help clients create a financial plan to adjust their retirement savings strategies and keep track of goals. Women respondents told Goldman Sachs that “knowing how long savings will last” is a top concern.

Take advantage of this little-known spousal IRA option. Women without earned income can set up a Kay Bailey Hutchison Spousal IRA or Roth IRA, as long as they and their spouses file joint tax returns.

There is one limit though. The combined contributions of both spouses to all of their IRAs must be less than the total household earned income for the year.

For a woman worker who has to leave work early, she can put up to $6,000 into her own account during 2022 and $6,500 for 2023. This contribution can go up to $7,000 if she is age 50 and older in 2022 and $7,500 in 2023, as long as her spouse stays below the same limits.

Bottom Line

SmartAsset: Women Lag in Retirement Savings. Two Options Can Help Boost Nest Eggs

A Goldman Sachs study shows that half of all woman are falling behind in retirement savings when compared with men. One of the reasons for this retirement savings gap, the study concludes, is that women are retiring earlier to take care of a family member. Working with a financial advisor can help women catch up. And contributing to a Kay Bailey Hutchison Spousal IRA or Roth IRA can also help boost retirement savings.

Tips for Retirement

  • A financial advisor can help you stay on track with your retirement goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Knowing how much you will need for retirement is key to reaching your goals. SmartAsset’s free retirement calculator can help you figure out whether you are saving enough.

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