Retirement Planning for Women

Note from Mr. SR: I’m excited to share this guest post by my friend Madison from Best Company. As a man, learning from Madison was an opportunity to hear a different perspective than my own — and that’s extremely valuable!


3 Unique Challenges Women Face in Retirement Planning  (and How to Overcome Them)

Different people face different types of financial obstacles in their life. While there are many basic finance principles that everyone should follow when preparing for retirement, there are a few specific to women that change the way women plan for retirement.

Three common obstacles that make it difficult for women to save enough for retirement include college debt, lack of financial confidence, and health care costs. These three factors do not affect all women the same, but countless women and couples that involve women, have manifested how these obstacles make saving for retirement tricky.

This article will dive into each of these challenges as well as offer tips on how to overcome them. 

(Check out this video for a quick look at financial tips for women, or continue reading for all the details!)


College Debt 

According to the American Association of University Women (AAUM), Women hold nearly two-thirds of the nation’s $1.54 trillion in student loan debt. Outrageous balances of student debt can largely be attributed to the exponentially increasing price tag to obtain a college degree compared to meager advances in median household income.

This disparity in university costs versus wages affects all college grads. However, many women face a pay-gap right out of college, making nearly 75% of what men make as a recent college grad. Women are starting the career race a few financial paces behind men, even as a college graduate, with just as much debt to pay down.

Between college debt and lower salaries as college grads, many women face the challenge of paying down debt with smaller amounts of income—making it more challenging to contribute to retirement savings.

Debt Repayment Tip: Progress is being made to lessen the pay-gap and to normalize careers for women that are normally dominated by men. However, something that women can do to strategically reduce debt and save more for retirement is by creating a debt repayment plan. 

Debt can be a scary feat to conquer when there is so much looming. Rather than be overwhelmed, women can compare the resources available to them. There are different ways to pay down student debt loans. Debt relief and personal loan companies for example can help women stay on top of payments and pay down their loan with a lower interest rate—saving hundreds or thousands of dollars overtime.

Whether a woman decides to get professional help or make a repayment plan on their own, the important thing is to consistently follow a plan. Paying debt off early will only lend to more immediate financial freedom. Once that money is freed up from college debt a woman will be able to use that money to contribute more to their retirement savings, like a 401K.

Lack of Financial Confidence

Statistically, many women have proven to lack financial confidence when it comes to investing and negotiating their salary.

When it comes to finances there are many women that feel unsure of how to invest in their future. For example, 41% of women report that their biggest financial regret is not investing more, with many women storing all their money in a traditional savings account. In comparison to a savings account which typically yields a 0.09% interest rate, the S&P 500 index yields an annual return of 8%—not to mention it’s a fairly low risk stock option.

Investing does not have to be a scary, complex, high risk investment. Instead it can be a great way to passively grow wealth over a lifetime until retirement.

Another way that women can miss out on income opportunities is by not negotiating their salary. A recent study surveyed MBA graduates that were interviewing for a job. Of those that got an offer, only about 7% of the women negotiated their salary, while 57% of the men did—and of those who negotiated, their starting salary increased by over 7%. Many women create a self inflicted income gap when they shy away from opportunities to negotiate salaries and ask for a deserved raise.

Finance Tip: Women can accelerate their financial gains and increase their retirement savings by investing in stocks or bonds and negotiating their salary. Investing may seem intimidating, but there are several low risk options available on the market—not to mention plenty of material on the internet to help anyone grow their knowledge about stocks and bonds.

Stocks that are diversified, rather than stock for one specific company, have low risk and great return over several decades. Bonds are even lower risk, but have a lower return rate than stocks. Either way, diversified stocks and bonds have the chance to grow and earn interest over several years and result in some passive, low risk financial gains. 

Besides investing, women can also increase their earnings by negotiating their salary. women in the workforce who have not recently negotiated a pay raise should do a bit of homework to prepare for this conversation. Women should first figure out the salaries of other local professionals in the field and second, should consider added responsibilities that they have taken on since starting. A well thought out case is important leverage to earn more of what is deserved in the workplace.

These are simple steps that women can take to secure extra income for their retirement savings. 

Health Care Costs

Health care costs can be a burden for anyone, but women especially need to save extra money for medical expenses during their lifetime, here’s why—

One of the most expensive health care costs unique to women are the costs associated with child delivery services. “The average cost to have a baby in the US, without complications during delivery, is $10,808.” The delivery costs can often be subsidized by insurance, but many new moms still find themselves owing thousands of dollars out-of-pocket with or without insurance. For a single mother these costs can be especially crippling.

In addition to child delivery services, women can expect to spend an extra $15,000 on health care services in retirement compared to men, totaling to about $150,000. Why is this the case?

For starters, there are certain health risks that are higher among women than men in latter years, such as autoimmune and reproductive health risks. Women need to account for the extra costs that they may face since their bodies age differently than men. 

Another reason why women need more savings allocated to health care is because on average, women are expected to live six to eight years longer than men—six to eight years! That means there are likely a few more years of expenses that women need to account for in retirement.

Health Care Tip:  For women who don’t yet have a specific retirement savings goal a great first step would be to start allocating funds for future health care expenses. A great option would be to open a health savings account (HSA), or even a flexible spending account. These accounts have great tax advantages to them and make it easier to pay for health expenses when they arise.

In addition to saving for health care expenses, women that are single or married need to quantify exactly how much they need for other retirement expenses, since it varies by person. It depends on factors like, the assets you have, the amount of money you want to spend, and the time you choose to retire. The best way to get an accurate estimate would be to talk to a financial planner.

A financial planner will be able to figure out exactly how much money you will need to retire for a number of different scenarios. Having this conversation early on in life can help women work towards their exact financial goal and eliminate stress associated with not knowing how much money is needed to retire.

The Bottom Line

Saving for retirement is important. Consistent efforts to plan and save will set women up for years of retirement bliss in the future. Women can feel empowered knowing that financial obstacles can be overcome with a little bit of extra determination and knowledge.

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