Another Factor in Women’s Retirement Planning
Retirement planning is important for all workers today, with the transition from defined benefits to defined contribution retirement plans. Women face an additional factor that makes retirement planning even more important.
This extra factor is the fact that the average woman takes 11 years out of the workforce to care for her family. The time spent caring for children, as well as ailing parents, is time that many women wouldn’t trade for anything. However, this time away from work does influence their ability to save for retirement.
The value of 11 years of contributions at retirement age can be substantial. When you consider that many women leave the workforce to have children early in their working lives, when they still have many years until retirement, the results are even more dramatic. Suppose a woman temporarily leaves the workforce at age 30. She would have another 29+ years until age 59 ½ when penalty free 401K withdrawals are permitted. Every $1,000 contributed to a retirement account at age 30, assuming an 8% annual return, would be worth nearly $10,000 at retirement.
Less time in the workforce places greater importance on making the most of the time that women are working. Since many workers don’t come close to maximizing their retirement savings, contributing as much as possible to company-sponsored retirement plans and tax-advantageous individual retirement accounts (IRAs) can help women make up for time out of the workforce. If factors such as credit card debt are making it difficult for you to save for retirement, then consolidating your debt with a peer-to-peer loan from Lending Club can be a big help.
Obviously, many women are far from average. The average takes into account women who do not leave the workforce as well as older working women who may have been more likely to take longer leaves than those in younger generations. If you plan to take time out of the workforce for whatever reason, or if you already have, make retirement savings a priority when you are working.
Friday, February 29th, 2008 at 10:45 am