When Robin Giles asks women why they don’t save for retirement, they often say the same thing: they don’t make enough money.
“It’s hard to convince people who are barely getting by to feel like they have money to save for retirement,” said Ms. Giles, a certified financial planner in Katy, Texas. Saving money in a retirement account that can’t be used without penalty until age 59½ is particularly discouraging for people who live paycheck to paycheck.
Women often find themselves in this situation. Some take time out of their careers to have children, and when they return to work, many are self-employed or accept lower-paying part-time jobs: 63 percent of part-time workers in the United States are women, according to the latest data from the Bureau of Labor Statistics. As a result, women often earn less than men and have less access to an employer-sponsored retirement plan.
Nearly two-thirds of workers in low-wage jobs are women, and Black, Native American and Latina women are particularly overrepresented compared to their participation in the overall workforce, according to a study by the National Women’s Law Center. Some women take jobs as fitness class instructors, traffic guards or Instacart shoppers, or do babysitting and cleaning jobs, to get the flexibility they need to care for their children or elderly parents, Giles said.
“But then they don’t earn a living wage and it’s very difficult to save for retirement when you feel like you’re working to make money,” he said.
In light of the benefits of flexibility, the issue of retirement savings has taken on an “extremely limited role” in women’s decision-making about staying home with their children, according to a 2022 survey of 1,586 mothers. made by YouGov and commissioned by TIAA and designed by economist Emily Oster. Thirty-three percent of women reported thinking “a lot” about the effect staying home would have on their retirement savings, while nearly 20 percent said they had not thought about it, the survey showed.
Other research has found that half of all mothers in the United States have no retirement savings, according to a survey cited in a 2023 report by the Century Foundation, a think tank that studies economic and social issues. Census Bureau figures show that there are about 34.5 million mothers living with children under the age of 18.
Leaving the workforce for just five years to care for a child could result in millions of dollars in lost income because of the way the U.S. retirement system is structured, said foundation member Laura Valle-Gutiérrez. . Caregivers lose an average of $237,000 in income over their lifetime, according to a 2023 Urban Institute study, and the loss of retirement income from Social Security and employment-based plans accounts for about 20 percent. percent of that total.
“We have a retirement system that is completely tied to work, not only with pension plans but because Social Security income is tied to employment,” said Ms. Valle-Gutiérrez. Women generally receive $5,000 less in annual Social Security benefits at retirement than men, she said.
Saving strategies
There are ways to save for retirement even if you work part-time, but doing so isn’t easy, Giles said.
“You have to be a diligent saver and preferably set up automatic contributions so you never see that money before it’s invested in your future,” he said. AARP Research has found that Americans are 20 times more likely to save for retirement if contributions are automatically deducted from their paycheck.
Crystal Cox tells her clients that it doesn’t matter how little money they save each month, even if it’s just $5 or $10. “Any amount you can save a month, you just have to start, because it’s habit-forming,” said Cox, a certified financial planner and senior vice president at Wealthspire Advisors in Madison, Wisconsin.
To help her clients find a few extra dollars in their monthly budget, Ms. Cox analyzes six months of bank and credit card statements to find recurring expenses that can stop.
“A lot of people don’t know where their money goes,” he said.
Cox recently learned that one of her clients, a 42-year-old woman who works in real estate, could quite easily reduce her monthly expenses by $400. The customer paid for several monthly subscriptions that she never used, including Disney+, SiriusXM radio, YouTube Music, and a gym membership. She also didn’t realize how much she was spending on impulse purchases at Target and Amazon, Cox said.
The customer canceled all of his unused subscriptions and removed the Amazon app from his phone. “Deleting the app made a big difference to your spending, because it’s so easy to think of something you ‘need’ and then buy it with one click,” Ms Cox said.
The client agreed to automatically deposit the money into her Roth individual retirement account each month. “While it may not seem like a lot, $400 a month for the rest of her working life actually makes a huge difference in her retirement,” Ms. Cox said. Assuming a 7 percent interest rate, a person could have $450,000 by the time they are 69 1/2, Cox said.
Even a small amount of money can add up over time. Ms Giles cited the example of buying a daily latte. (The much-maligned financial advice of skipping the morning trip to the coffee shop to save money works, she said.)
“It can be powerful when you show them the calculations and what they could save if you extended it by a month, six months or even 12 months,” Ms Giles said. For example, if you could save $6 a day, you would have an extra $180 at the end of the month and $2,160 at the end of the year, and that’s before interest.
Another way to find savings is to take a closer look at annual bills, such as cell phone and utility bills and insurance policies for your home and car, Giles said. Most people pay these bills year after year without asking what they are paying for, he said.
“Call your insurance agent and ask them to review the coverage; Ask specifically if there is anything you can cut back on, especially if any of your needs have changed,” he said.
Once you find extra money, it’s important to set it aside right away, Giles said; She recommends that any savings found be automatically deducted from your paycheck and placed in an IRA.
Too often, people open an IRA with the best of intentions, but then fail to fund it by not making monthly deposits, believing they will fund it in a lump sum at the end of the year, said Melody Evans, wealth management advisor at TIAA. “But then other bills come up and emergency needs arise,” she said.
Mothers or caregivers who take time off work to care for a child or elderly parent should try to continue saving for retirement. For couples, if one spouse works full time and the couple files a joint federal income tax return, the non-working spouse can open and contribute to a spousal IRA, Ms. Giles said. In 2024, the annual contribution limit for Roth and traditional IRAs is $7,000.
In general, it’s a good idea for women to set up their own savings accounts and not rely on their spouse to fund their retirement savings account, said Ms. Cox, who often works with women who are recently divorced or widowed. and they find themselves struggling to find meaning. of your finances. “Having your own savings helps establish good money habits,” she said.
Maximize your contributions
Too often, couples think of employer-sponsored retirement plans as a benefit only for the spouse who is working, Evans said. She recommends viewing retirement benefits as a vehicle for both spouses, the same way a couple would view the health care benefits of a working spouse.
For example, one of Ms. Evans’ clients is a teacher with access to a 403(b) retirement plan, a defined contribution plan offered by public schools and certain tax-exempt organizations. Her husband is self-employed and works on a contract basis. While she may earn a significant salary throughout the year, the couple never knows exactly when she will receive a paycheck or exactly how much money she will earn.
If the wife were considering only her own $60,000 salary, she would probably plan to save about 7 percent ($4,200) for retirement, Evans said. Instead, the client included her husband’s anticipated salary in her calculations and plans to save more than 18 percent of her salary ($11,200) because he does not have access to the same type of low-cost retirement plan. cost than her.
If your spouse has an employer-sponsored retirement plan, consider whether you’re saving enough for one or two people to retire, Evans said.
