Published by Taylor Financial Group (for women)
This is Week 2 of our weekly series on “How to Avoid Four of Retirement’s Biggest Pitfalls.” In Week 1, we emphasized how every woman needs to calculate her retirement savings needs, or she risks running out of money in retirement. If you missed that post, we encourage you to follow the link here to learn more about how to avoid one of retirement’s biggest pitfalls.
We are now addressing the second biggest pitfall- not saving enough. Today, a woman earns only 80.5 cents for every dollar a man earns, and women’s median annual earnings are $10,086 less than men’s. Bottom line, the average woman makes less money than the average man.1 Meanwhile, women investors typically start saving 2 years later (age 28) than men (age 26). 2 Women need to start saving and investing their money sooner for retirement, to account for the substantial gender wage gap they face. Additionally, the sooner you start investing, the more time that money has to compound over the long term. For example, in the graph below, Consistent Chloe (who invests $5,000 from ages 25 to 65 earning 6%) gains $820,238 total, while Late Lyla (who invests $5,000 from ages 35 to 65 earning 6%) gains $419,008 total. By investing $50,000 more and starting just 10 years earlier than Late Lyla, Consistent Chloe gains over $401,230 more than her counterpart, and proves that saving early and often are some of the keys to a successful retirement due to the power of compounding over the long term. 3
Figure 1: Benefit of Saving and Investing Early 3
At Taylor Financial Group, we encourage women to start saving their money sooner rather than later, help women invest their money (at a risk level they are comfortable with), and create personal plans for retirement. If you have any questions or concerns about your retirement plan, feel free to reach out to us at Taylor Financial Group so we can help you create a more positive financial future.
- 6 Charts Show How Much More Men Make than Women, Business Insider, 4/10/18
- 10 Alarming Facts about Women and Retirement Risks, ThinkAdvisor, 3/9/17
- Guide to Retirement, JP Morgan, 18