When it comes to planning for retirement, women face a greater challenge than men. DailyFinance.com talks about the $849,000 gap. There are three major factors in determining this number. First, women live longer than men (typically five more years). Next, they take more time off from work to care for family members, including children, an ailing spouse or elderly parents. Lastly, they earn $0.77 on a man’s dollar according to a study by the Institute for Women’s Policy Research.
There are steps a woman can take to help her save for retirement. For the working woman, invest in your company’s 401k. Many employers will match contributions up to a certain threshold so make sure to invest at least to that point. Also, know you’re employer’s vesting schedule so you’re prepared when you need to take time off from work.
If you are married, but don’t work, you should open a spousal individual retirement account. This is a traditional IRA that you can invest in even if you don’t have any earned income yourself. You are allowed to invest up to $5,000 assuming all requirements are met.
30% of American small businesses are owned by ladies. If you are one, you should start a SEP IRA. This simplified employee pension IRA for self employed workers and small business owners. Contributions are usually 100% tax deductible and earnings grow tax-deferred.
The New York Times also has an article relating to this. In it, they talk about potential options the Government Accountability Office has offered to help women plan for retirement such as automatic IRAs, expanding the saver’s credit & catchup contributions and more. Read that article here.
Ladies, take control of your retirement planning today. The IRA Financial Group is waiting to hear from you!