Retirement planning is indeed a fundamental aspect of achieving long-term financial well-being for everyone. This holds particular significance for women, who often navigate distinct challenges that can influence their retirement savings and overall financial outlook. Recognizing these potential hurdles and taking thoughtful, forward-looking actions is essential for women to cultivate a secure financial future and look forward to a comfortable retirement.
In light of this important topic, a recent report published by The Family Office provides valuable perspectives and analysis. The report delves into the reasons why retirement planning is especially critical for women, outlines the specific obstacles they commonly face, and elaborates on how carefully constructed, individualized investment portfolios can be instrumental in navigating these complexities and empowering women to achieve their retirement aspirations. We encourage you to explore the insights offered in this report to gain a deeper understanding of this crucial area.
Problems women face in retirement plan
Recognizing the distinct hurdles women encounter when preparing for retirement is essential. Several interconnected factors can make it more challenging for women to achieve financial security in their later years.
One significant aspect to consider is longevity. Statistically, women generally have a longer life expectancy than men. This means that their retirement savings need to sustain them for a greater number of years, requiring careful planning and potentially larger nest eggs.
Another key factor is the impact of career trajectories. Women are often more likely to take time away from the workforce for family-related responsibilities, such as childcare or eldercare. These career interruptions can lead to reduced lifetime earnings and slower growth of retirement savings due to fewer years of contributions and compounding interest.
Furthermore, persistent gender pay gaps mean that women, on average, earn less than men over their working lives. This disparity in earnings directly translates to a reduced capacity to save for retirement, making it more difficult to accumulate the necessary funds for a comfortable future.
Click here for 10 Tips to save money
Long life expectancy
Current statistics indicate an average life expectancy of 73.8 years for women compared to 68.4 years for men. This difference in longevity has significant implications, particularly when it comes to retirement planning.
Given this longer life expectancy, it becomes especially crucial for women to proactively plan for a potentially more extended retirement period. To ensure financial security and the ability to maintain their desired lifestyle throughout these additional years, women may need to focus on building a larger retirement fund. This proactive approach can help address the unique financial challenges that a longer retirement can present.
Career gap
It has come to our attention that many women experience breaks in their careers due to the demands of caregiving, whether it’s for raising children or looking after elderly family members. We understand that these important responsibilities can sometimes necessitate extended periods away from paid employment.
We also recognize that these career interruptions can unfortunately result in substantial long-term financial consequences for these individuals. Specifically, time spent out of the workforce can lead to fewer overall years of earnings, reduced contributions to pension plans, and ultimately, a smaller retirement fund than might otherwise have been the case.
Gender Gap in payment
It’s important to acknowledge the persistent gender pay gap, where women, on average, earn less than their male counterparts. To illustrate, data released by the U.S. Bureau of Labor Statistics in 2022 shows that women earned approximately 83 cents for every dollar earned by men.
This disparity in earnings throughout a woman’s career has substantial long-term financial consequences, particularly when considering retirement. The cumulative effect of lower earnings directly translates to reduced savings and lower pension contributions, potentially jeopardizing women’s financial security in their retirement years.
Click here for Checklist for Retirement
How to create a retirement savings plan
Here are initial steps for your retirement planning.
First, understand your current financial situation, including income, expenses, savings, and investments.
Next, define your retirement goals, considering your desired retirement age and lifestyle.
Then, estimate your retirement needs, factoring in inflation and healthcare costs. Our Family Office offers a retirement calculator for this.
Following that, develop a detailed savings and investment plan, outlining contributions and asset allocation. Consult a financial advisor. It is beneficial.
Finally, regularly review and adjust your retirement plan as needed due to changing circumstances and market fluctuations.
Take away
Given the distinct financial landscapes women often navigate, including potential career interruptions and generally longer life expectancies, it’s crucial to prioritize and engage in proactive retirement planning. To this end, exploring investment portfolios specifically constructed to meet these unique considerations can significantly enhance long-term financial security.
The investment strategies are designed to acknowledge factors such as possible breaks in career progression, potential disparities in income levels over time, and the imperative for sustained growth over an extended retirement period. By taking these elements into account, such portfolios aim to provide a more resilient and adaptable financial foundation for the future.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
