To keep on track with saving, it’s recommended that you invest a percentage of your income from every paycheck. Women will need to invest a greater percentage of their income than men. You may also need to invest more, the older you get.
In the USA, women make 18% less income than men on average. Yet, women aren’t paying 18% less on housing, groceries, utilities, and they often have higher health care premiums. As women save for the future, they need to factor in this difference.
Women often work fewer years than men, due to childcare or eldercare. This means that during their years off for maternity leave, or to look after children, they are not earning anything, and thus are not putting anything into their retirement funds. There may also be the situation where as women’s parents age, they may take a leave of absence to care for sick or injured relatives.
According to the Globe and Mail, 10% has been the answer to this question for many years. But factor in the consideration that each year, inflation increases. Corporette advises that this amount should be 15%, if you start saving at age 25. But if you begin saving at age 35, with a plan to retire at 65, you need to save 24%. By age 35, you should already have 1X the income in your savings account. But what if you’re a woman? These percentages will need to be more than what a man needs to save.
One helpful bit of advice to women is to save as much money as you can, as often as you can. One reader (Scarf Lady) on the Corporette site noted that she was saving as much as 50% of her income for the future.
If you’re searching for a specific answer, take the 15% recommended for men, and tack on the 18% difference. This means that you should be saving 34% from your gross income. Not everyone can do 50%, but that may be the goal as you enter your 60s, and your house has already been paid off.
To help women invest a percentage of their income each paycheck, they should start as soon as they are employed. They may also take advantage of any employer plans available. Funds moved from gross income into registered retirement savings plans will result in a greater net income for you, than if you transferred funds yourself. That’s because taxes are calculated on gross income, after the retirement funds are moved.
If you have a specific goal in mind for retirement, such as sailing the world, or traveling through Europe, you must begin saving now. 34% is a good starting point for investing your income. It’s never too early to plan for your future. When you’re 65, you’ll enjoy the benefits of having a flush savings account. Who knows, you may even find new ways to spend it!
|Elisabeth Donati is the owner of Creative Wealth Intl., LLL, creator of Camp Millionaire, Moving Out! for Teens, The Money Game, Celebrating Women and Wealth and several other financial education programs, products and services. She was the recipient of the 2010 Financial Educator of the Year Award from the National Financial Educators Council. She is known as The Financial Literacy Lady.She is author of The Money Jars: Your Magical Money Management System, The Ultimate Allowance, and co-author of Rocks to Riches for kids. Her blog, Financial Wisdom with a TWI$T, is a great place to start learning to think differently about money and investing.
Elisabeth is an expert in teaching the basic financial principles people need in a way that is engaging, empowering and fun. For information, visit www.CreativeWealthIntl.org or www.ElisabethDonati.com or call 805-957-1024.