When it comes to saving for retirement, time can be your biggest ally or your biggest enemy, depending on when you start. And for women, time is not always on our side.
Women are more likely to be caregivers, both for children and for aging parents, which has a tendency to set us back financially. We take breaks during our career to focus on home and family which means we’re likely not making as much as many men do. Combine that with the wage gap between men and women and that means that we need to be much more proactive about saving.
Covid Didn’t Help
The coronavirus pandemic has likely made the existing gender gap between retirement savings worse, as women have been more likely to lose jobs due to overrepresentation in industries hit hardest or have left the workforce to care for children or other family members.
Women have been regaining jobs much slower than men in the pandemic recovery. In August, women gained 28,000 jobs while 207,000 men found new work, according to the Labor Department. About 39% of unemployed women have been out of work for six months or more, and more than 25% of unemployed women have been out of work for more than a year.
All of these things negatively impact the ability to save for retirement.
As I discussed in my blog, Women Going to Work After Covid: How to Get Back on Track Financially, there are things we can do now to get ourselves on the right path – and time is of the essence. Here is an example from the Motley Fool about the high cost of procrastination:
- Wendy started saving at 40 and continued until age 65. She contributed $4,000 annually, for a total of $100,000. She earned 7% annually and reinvested dividends and capital-gains distributions.
- Robin started saving at age 25 and contributed $4,000 annually for just 10 years, for a total of $40,000. She also earned 7% annually and reinvested dividends and capital-gains distributions.
Before I reveal the results, note that Wendy saved and invested more than twice the amount that Robin did -- $100,000 versus $40,000. Note also that Wendy did so over 25 years, while Robin was actively saving and investing for just 10 years. You might think that Wendy should end up with more. But you'd be wrong.
By age 65, Wendy had an ending balance of $271,000. And Robin? Well, hers was - get ready - $450,000!
Now, I realize that in the case of women hitting “pause” on their employment due to Covid is not the same thing as someone not putting money away for retirement because they just haven’t gotten around to it. But the principle is still the same.
It’s Time to Move Forward
As with all financial matters, the first step is being honest about where you are. There is a lot of shame surrounding finances which, unfortunately, makes many women feel paralyzed.
Acknowledge that it’s time to take the first step. Find an advisor you’re comfortable with who will help you create a doable plan and keep you accountable. Remember that you’re not alone and that many women out there are experiencing this.
Don’t let time be your enemy when it comes to your financial future.