Why women need to save more for retirement

Longer life spans mean women need to save even more for retirement

Why do women need to save more for retirement? The main factor is longevity. Put simply, women on average live about three years longer than men, but many women live decades longer than the average. The thing about old age is that the longer you live . . . the longer you are expected to live. 

That means women will need more income for those extra years. With women living longer, that means they need to save more in order to pay for the later years of their lives, full of increasing health care and prescription drug expenses. Today, retirement preparation is a do-it-yourself process that requires everyone to take charge early and learn the rules. The sooner you start the better!

There are just a few ways to get retirement income: from Social Security benefits, a retirement plan at work, and personal savings. So the first step is to know what will be available from each of these sources.

Remember that Social Security is intended only as the foundation for retirement; right now it replaces about 40 percent of an average earner's wages. The problem is that too many people, including women, rely on it as their primary or only source of retirement income.

If you have a 401(k) or 403(b) plan at work, find out your current balance. If you do not have an employer-sponsored plan or you are self-employed, open an Individual Retirement Account (IRA).  This personal savings account can provide another channel for saving money.

Now think about how long retirement might last. Be realistic. Look at your health and family history. If women in your family live a long time, then you need to plan for a longer retirement. For example, you may want to work until age 70 to max out your Social Security benefit, and then plan for 25 more years, living until age 95.

You can take all of this information and try one of the many online retirement planning calculators. The calculator at www.360financialliteracy.org allows you to test various scenarios and see if you are on track. 360 Financial Literacy is a program of the nation’s Certified Public Accounts. 

If the numbers don’t work out to your satisfaction take steps to improve the situation. For instance, you might plan to work part-time during retirement or move to an area where the cost of living is lower. The most important thing is to start planning now.

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