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Women and retirement saving: 10 tips for getting on the right track

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Women earn about $0.79 for every dollar a man makes, according to the Bureau of Labor Statistics.

So it makes sense that on average, men have more money in their retirement accounts than women. Since men make more, they have more money to invest.

And considering that women tend to live longer than men, according to the National Institutes of Health, financial disparities are felt that much more intensely in retirement. Women have less to go on for a longer period of time.

Here are 10 things women can do now to take control of their finances.

1. Knowledge is power.

Don’t assume a pay gap exists, but don’t assume it doesn’t.

Women should know the average pay for their position, and if they’re not making it, they shouldn’t be afraid to ask their bosses for a raise, said Tara Mashack-Behney, president and partner of investment advisory services at Conrad Siegel, an employee benefits firm based in Susquehanna Township, Dauphin County.

“I’ve seen men do it, and I’ve seen men get it,” Mashack-Behney said. “You are your only advocate.”

2. Invest at least 10 percent of your paycheck.

Generally, 10 percent to 15 percent of your salary should go to savings, Mashack-Behney said.

“I know you have to put food on the table and pay the bills. I get that, but we need to make sure that we take a step back, we do a budget, we’re living within our means, and saving for retirement is paying yourself first,” Mashack-Behney said.

But even a 10 percent investment, Mashack-Behney said, may work out to provide only 70 percent or 80 percent of a saver’s pre-retirement income.

To cover more than just 70 to 80 percent of pre-retirement income, Jennifer Epstein, partner at New York Life Insurance Co. in Harrisburg recommends investing 15 percent to 20 percent of your paycheck.

“If you’re setting aside less than 15 percent, you’re going to be struggling later,” Epstein said.

3. Start saving early.

Women should start saving as soon as they get their first paycheck.

“Everything that you do between ages 25 and 35 is going to be triple what’s going to happen for somebody who starts at 55,” Epstein said. “Starting earlier is going to make all of the difference.”

Waiting to invest until mid-career will cost more in the long run.

“You’ve just missed out on saving for years and all that compound interest”, Mashack-Behney said.

4. Don't be too conservative.

Women tend to invest too conservatively.

Of course, investing too aggressively can result in a loss of money since it tends to be riskier, but so can investing too conservatively. Inflation could outpace interest income from those more conservative investments, Mashack-Behney said.

While volatility is low in conservative investments like bonds and Roth IRAs, so is the return.

Balancing riskier investments with more conservative investments is key.

“You need to take your age, your goals, your risk tolerance, what you have and come up with an appropriate mix,” Mashack-Behney said.

5. Find a good financial adviser.

Having a good relationship with a financial adviser makes a difference, especially for investors putting money in the highly unpredictable stock market, Epstein said.

“We have to find somebody trustworthy, we have to ask a lot of questions and make sure that the person is giving us good advice, and sometimes that’s uncomfortable for women to do,” Epstein explained.

Don’t just go to anyone, said Karen Saxe Eppley, principal of business management consulting firm Marketing Muse in York.

Interview financial advisers, look over their investment returns and trust references from your friends, Eppley added.

6. Take advantage of employer-match programs.

A 401(k) match is free money.

“Don’t leave that on the table,” Mashack-Behney said.

“If you can get a match, take it. Whatever you need to put in there to get free money, do it. Do it. Do it,” Epstein said.

And if a company matches, Eppley said, she would tighten her belt and put in more of her own money.

7. Don't just use it because your employer offers it.

Don’t use a 401(k) just because an employer offers one, especially if there is no match.

“If they’re not matching, then you owe it to yourself to determine what’s best for you,” Eppley said.

But even if there is a match, it may not be the best option.

Compare the return for the company’s 401(k) to what a financial planner may be able to offer, Eppley said.

8. Set up automatic deduction.

A pre-determined portion of each paycheck should automatically be deposited into an investment account on a weekly or monthly basis.

“Truly the best piece of that puzzle is to set it up and forget about it,” Eppley said.

Just make sure the automatic deduction is not set too high.

“Because if you’re feeling like too much money is being taken out, you’re going to cancel your investments which is going to hurt you in the long run,” Epstein said. “If you can, have a system to set aside a certain amount and you live within your means for goodness’ sake.”

Setting it and forgetting it reduces the temptation to spend that money on other things.

9. Don't just use a 401(k).

The entire 401(k) gets taxed when it is withdrawn, which is why it’s wise to use multiple products and strategies for retirement, Epstein said.

“So if you’re not putting a significant amount aside, you may have $1 million at retirement, but no you don’t because you have to pay taxes as you’re taking it out. $1 million does not go very far as far as retirement is concerned,” Epstein said.

Those with 401(k)s or other investments in the stock market, should look at Roth IR’s or permanent life insurance to balance out the risk, Epstein said.

10. Adjust how you invest as you advance throughout your career.

Women within 10 years of retiring need to start ensuring that they have enough guaranteed income to cover their basic expenses, Epstein said.

They also need to make sure they have the right mix of investments, one that is not too conservative and not too aggressive.

While that’s important along the way for everybody, it’s something of which people nearing retirement need to be acutely aware, Mashack-Behney said.

Women in the middle of their careers need to make sure they are on track investment-wise. If they didn’t have the luxury of saving early, they need to figure out how to get on track.

These women are probably making more money and should bump up their savings a little bit while making sure that they have a balanced mix of stocks and bonds, Mashack-Behney said.

Women who are just starting out can and should take more risks than women in their 60s.

For women in their 20s who have a long time until retirement, being in the stock market makes a lot of sense, Epstein said.

If the stock market goes down, there’s still time to recoup money that was lost. The stock market fluctuates, and younger people have more time to ride it out, Mashack-Behney said.

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Shelby White

Shelby White covers banking and finance, law and Lancaster County for the Central Penn Business Journal. For tips, email her at swhite@cpbj.com.

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