What Women Need to Know About Investing and Retirement
Take control of your financial life
When it comes to planning for retirement, women face a different set of challenges than men. These challenges include:
- Longevity: On average, women live longer than men1.
- Decreased earnings potential: Women typically earn less money than men1.
- Employment opportunities: Women are more likely to work in part-time jobs that don't qualify for retirement plans2.
- Career tracks: Working women are more likely than men to interrupt their careers to take care of family members2.
- Tempered returns: By and large, when it comes to investing, women are more conservative than men2.
What does it mean to me?
Generally speaking, women tend to work fewer total years than men, meaning they are likely to contribute less to their retirement assets. Also, women on average live longer than men-81.1 years for a typical woman in the United States versus 76.3 years for a man3. Given these facts, investing for retirement takes on a heightened importance for women.
Steps you can take to overcome these challenges
Since women must plan for a longer retirement-and must typically do so with a smaller pool of assets-it's important to start planning as early as possible. Here are some steps you can take to help achieve the retirement lifestyle you're envisioning:
Determine the income you'll need in retirement
As a general rule, you'll need roughly 70-80% of your average annual income to maintain the same lifestyle you were accustomed to prior to retirement. It should be noted, however, that everyone's situation is unique.
Pay yourself first
Once you know how much you'll need, you can start setting goals. When it comes to choosing between putting money in your retirement fund and allocating it elsewhere, generally speaking, it's best to pay yourself first. Remember, you can't take out loans for retirement.
Start early and take the "free” money
Participating in an employer-sponsored retirement plan- like a 401(k)-is easily one of the best and most effective ways to start putting money aside for retirement. A 401(k) includes numerous benefits, starting with the ability to contribute pre-tax dollars into your retirement assets, which may even help lower your tax bill.
In addition, contributions made to a 401(k) will potentially grow tax-deferred. This means you won't pay any income taxes until you actually withdraw the money. Best of all, many employers will match your contributions, essentially adding "free” money to your account.
Plan for the care you may need
Many people don't realize that health insurance pays for doctor and hospital bills only if you are sick or injured, and that Medicare will only cover a short stay in a nursing home or limited at-home care, but only under strict conditions. You may want to explore the option of Long-Term Care Insurance (LTCI). LTCI can help pay for costly medical expenses in the untimely event of debilitating illness or injury. Without LTCI, you may have to cover these costs out-of-pocket, which could take a major bite out of your nest egg.
Look toward your future
Retirement planning might at first seem complicated or even overwhelming, but it's important you take control so you can achieve the retirement lifestyle you're envisioning. And remember, you don't have to go it alone. To discuss your plans for retirement, contact PNC today.