How Men and Women Do Retirement Planning Differently

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Even though most people feel there is a need to save for retirement, many do not realize that there are different needs between men and women and how they save. When retirement planning, it is necessary to have more than just a retirement account, you also need specialized goals.

Women are more likely to face their last couple of years in retirement alone because men do not live as long. The Centers for Disease Control says that men’s average lifespan is about five years shorter than women’s.

Men are also more likely to remarry in their senior years than women if they go through a divorce or widowhood, enabling them to enjoy the benefits of a better retirement. Women who do not remarry seem better equipped for living alone, but they most often must do it on a smaller retirement savings account. Plus, singles face more taxes than married couples.

Women Save Differently Than Men

Most of the time, women face two financial struggles that men do not. First, women often earn less than men, although the salaries are closer now than ever. Secondly, women often stop working as they go through childbearing and caring for the children.

A third reason women save less is because women often work part-time jobs that do not include retirement plans. The salaries at those places are often too low to enable them to save anything.

Women are also more likely to become caregivers, which can eat up more of their finances and time. It also results in less opportunity to put money aside for retirement.

These factors work together to cause most women to have less retirement savings than the average man. A study conducted in 2016 by the National Institute on Retirement Security (NIRS) revealed that the average man at 65 or older was earning $57,144 and the average woman at the same age was earning only $47,244—about 17 percent less.

A Difference in Investing

While saving for retirement, men will often invest their savings, but women seem to prefer keeping cash around. Fidelity mentions that not investing their retirement money means women will have less than men because they do not take advantage of the power of compound interest. The result is that when a lack of investing is combined with smaller lifetime earnings, they end up with a considerably lower net worth.

The women that do invest perform almost as well as men. USNews reveals that 14.9 percent of women investors were able to beat the S&P 500 Index, compared to 15.7 percent of male investors. At the same time, about 25 percent of male investors were apt to lose money in their investments.

Women can enlarge their retirement savings if they invest. Investment managers can help you get started. You can go from there by using a managed account—where the managers are responsible for the investment choices, or you can direct your own investments if preferred. It will help if you read a book or two beforehand on investing.

If you decide to choose an investment manager, compare services and fees. Also, look at online reviews about the company to ensure you are getting the best company and costs possible.

Start Saving Early

The biggest advantage anyone can have when retirement planning is to start saving as early as possible. Even a little bit saved each year in a retirement account can become significant if you make consistent contributions. The primary driving factor in building a large retirement fund is compound interest.

A retirement account from your employer is even more valuable if they offer matching funds. If offered, contribute at least enough to get their maximum matching amount. Or, if you are paying off an education loan, some employers may reimburse at least some of your loan repayments and put it directly into your retirement account.

Traditional Retirement Accounts and Roth Accounts

Your employer may offer traditional individual retirement accounts (IRAs) and 401(k)s. They may also have Roth IRAs or Roth 401(k)s. Traditional retirement accounts give you a tax break upfront, but you must pay taxes when you make withdrawals.

You will have more money each month in retirement when contributing to a Roth account because there are no taxes on withdrawals. Also, you will not be forced to make withdrawals after turning 73 because Roth accounts do not have required minimum distributions (RMDs). It lets you withdraw money when needed, or you can leave it in the account to continue to grow.

Consider Health Savings Accounts

A health savings account (HSA) offers an excellent way to save money for retirement and reduce taxes. Before getting an HSA, you must purchase a high-deductible health insurance policy.

Money put into an HSA is tax-deductible. When used for medical expenses, the money is tax-free. The money in the account also grows tax-free. Fewer taxes in retirement means you will have more money to spend on traveling and other activities.

Pay Off Debt Before You Retire

Another important part of your retirement plan should include paying off all debt before you retire. It will give you more money to meet your needs during your retirement years. Also, do not forget that your medical bills will likely increase as you get older.

Plan to Have Ongoing Income

After you retire, you want to have a constant source of income. Getting Social Security benefits will help, whether you are a man or a woman, but it should not be your sole source of income. You also will have the added expense of Medicare, but remember that there will be copays and coinsurance each time you get medical care. It also does not pay for long-term care.

Your retirement plans should include projections that include annual inflation. Talking with an estate planner or financial advisor will help you be better prepared—but do not wait until you are close to retirement to start making plans.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.