Retirement for Single Women

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.

Why?

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?

Retirement for Single Women: The Game Plan

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.

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!  

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