Is retirement for single women really different?
That’s a question I get asked a lot.
And, unfortunately, the answer is yes. Here’s why.
Women have to work hard for what they need and even harder to keep what they have.
Saving for retirement is no different.
You might be thinking, “Well, sure, but everyone works hard when they want something.”
That’s true, but there are some pesky, deeply ingrained disadvantages to our society that prevent women from saving as quickly as men (among a whole bunch of other stuff).
The trick is to know those disadvantages, take control of them, and demolish them along the way.
Ok, So What Are the Disadvantages?
First of all, the average woman earns 80% of what a man earns.
This means that women have to save a higher percentage of their salary if they want to even come close to saving the same amount for retirement that a man does.
If a man making $50,000 a year puts 9% of his annual income toward retirement, that guy has saved $4,500 by the end of the year.
On the flip side of that scenario?
A woman in the same role is only being paid $40,000 a year.
That’s disadvantage #1.
To make matters worse, this pay gap means that even if she puts away money at the same rate of 9%, she’d only have $3,600 saved by the end of the year.
That means putting away an even higher percentage of a lower salary.
Which seems crazy, right? Girl, it’s not like we don’t need the money!
You know what’s even more concerning?
New research shows that the pay gap might be even larger than we think.
Women live an average of five years longer than men (you know, so that we can deal with gender gaps for a few extra years).
So, we’re are expected to have 39% higher out-of-pocket healthcare costs in retirement than men just because we live longer.
That increases your overall retirement bill by a whopping $194,000.
Dang. As if retirement for single women wasn’t already stressful enough!
Research from Wealthsimple finds that 47% of millennial women consider money the most stressful thing in their lives, compared to 34% of millennial men.
Take a Deep Breath
We know that investing feels scary because we need our money now; it can be hard to see the immediate value of investing for the future.
Statistically, women are less likely to invest and most don’t do so until they are older and feel they are financially stable enough for the “high stakes” game of investing.
A big misconception around investing is that you have to be an expert to succeed, when in reality there are so many tools and resources that make investing super simple.
And, you don’t have to start with a huge amount of money to make this work; you can start by investing just a few hundred bucks a month and over time it will grow.
A good rule to live by is that 50% of your income should be set aside for your “needs”; food, rent, clothes, utilities, and all those other life necessities.
After that, figure out what you can afford to invest in your future self.
According to a study by Merrill Lynch, 41% of women wish they invested more of their money (here’s the full study if you’re really invested in this topic).
But, how can you possibly afford to retire when we’re telling you that life is expensive and the system works to your disadvantage?
How Much Does a Single Woman Need to Retire?
Figuring out how much a single woman needs to retire is a bit of an adventure.
It’s all about personal lifestyle, expenses, and how long you plan to enjoy those golden years.
Here’s an easy way to start:
- Crunch the numbers: Jot down your yearly retirement expenses, like rent, groceries, healthcare, and those epic vacations you’ve been dreaming of. Oh, and don’t forget about inflation – those costs will sneak up over time.
- Say hello to the 4% rule: This cool trick says you can safely withdraw 4% from your retirement stash in year one and adjust for inflation each year after. Divide your yearly expenses by 4% (0.04) to find your retirement savings goal.
- Add some icing on the cake: Got extra income sources like Social Security, pensions, or a fun part-time gig? Sweet! Subtract that amount from your annual expenses before applying the 4% rule.
- Expect the unexpected: Healthcare can be a doozy, so factor it into your plans. And always keep a stash for those curveballs life likes to throw.
Keep in mind, this is just a starting point. Your own retirement journey is as unique as you are!
Chatting with a financial advisor (like me!) can help you tailor your plan to your fabulous lifestyle.
Retirement for Single Women: A Better Game Plan
So, in the above example, I introduced you to the 4% rule. And if we crunch the numbers based on annual expenses of $58,000 a year, it means you’ll need at least $1,450,000 to retire.
But there’s a better way to save that money to ensure all your income in retirement is tax-free and you never have to worry about market downturns.
The best way to save for retirement is with a Roth IRA. 💣
A Roth IRA works differently than a traditional IRA, since you contribute after-tax dollars to this account.
The funds you contribute grow tax-free and can be withdrawn on a tax-free basis once you reach retirement age.
As an added bonus, you are able to withdraw your contributions to a Roth IRA account at any time without penalty even before retirement if you get into a pinch (though you would have to pay taxes on any profits earned).
If you invest money the way we recommend here at My Money My Freedom, you can live off the income from your account and still have money when you need it for assisted living or in-home care.
And the best part? Your income in retirement from that same $1,450,000 could be $116,000 tax-free instead of just $58,000 taxed.
This m’ lady, is the secret sauce of my Infinite Income system of retirement planning and investing.
OK, Now That I Have This Money, Where Should I Retire as a Single Woman?
Choosing the perfect spot to retire as a single woman is like picking the perfect pair of shoes—it’s all about finding the right fit for your unique personality and preferences. To help you find your dream retirement destination, consider these factors:
- Safety: Look for places with low crime rates, so you can feel secure exploring your new surroundings and making new friends.
- Affordability: Your retirement funds should stretch as far as possible, so consider cost of living, taxes, and housing prices when making your decision.
- Healthcare: Access to quality healthcare is essential, especially as we age. Research local healthcare facilities and availability of specialists to ensure you’ll be well taken care of.
- Social life: You’ll want a vibrant social scene to make new friends and stay connected. Look for cities with active communities, clubs, and events that cater to your interests.
- Climate and scenery: Do you prefer warm, sunny days, or are you a fan of the four seasons? Choose a location with a climate and scenery that make you happy.
- Activities and hobbies: Make sure your new city has plenty of opportunities for you to pursue your passions or discover new ones, whether it’s outdoor adventures, cultural experiences, or volunteer work.
Some popular retirement destinations for single women include:
- Asheville, North Carolina
- Austin, Texas
- Sarasota, Florida
- Portland, Oregon
- Santa Fe, New Mexico
Remember, the best place for you is where you’ll feel happiest and most fulfilled. Take some time to explore, visit different cities, and get a feel for the vibe before making your decision.
If you haven’t taken time to set up a retirement account, this is your official nudge.
Despite the stereotypical belief that women aren’t good investors, women actually possess quite a few qualities that give us an edge in the market; we’re long-term planners, goal-oriented strategizers, and we’re more likely to ask for professional financial help.
Women approach risk differently than men and are more likely to experience steadier investment growth over time.
The good news is, you can start taking your future goals into your own hands right now.
Don’t be part of the fifty percent of Americans who haven’t even begun to think about how much they need to save for retirement.
Acknowledge those pay gaps and stereotypes and misconceptions and then put them aside. We know you’ve got this!
Retirement for Single Women FAQs
How to prepare for retirement as a single woman?
Preparing for retirement as a single woman may seem like a mammoth task, but with a little bit of planning and effort, it can be achieved successfully. Firstly, consider health insurance that includes long-term care to secure yourself against unexpected expenses. Then, plan strategically with a Roth IRA to ensure steady, tax-free income during retirement. Seeking expert advice can also help you make informed decisions. Start contributing the maximum to your Roth IRA, learn to manage your finances effectively, and stay out of debt. Additionally, maintain a consistent sleep schedule and invest in your health. Lastly, consider a single-friendly retirement community to socialize and feel connected. Remember, with a few minor adjustments to your lifestyle, you can retire comfortably as a single woman.