Retirement Planning for Women 101

The three gender-specific retirement-planning challenges all women face and what to do about them.

May 2, 2014 at 7:30PM

Ginger Rogers beautifully synchronized her footwork in lockstep with Fred Astaire -- except hers was backward, and she was wearing high heels. Similarly, when women plan for retirement they face gender-specific challenges.

Here are a few.

1. Longer life expectancy
In the U.S., life expectancy for a woman is 81 years, compared to 76 years for a man. 

2. Taking more time off work to care for loved ones
Female caregivers spend an average of 11 and a half years out of the workforce caring for children, elderly parents, or a chronically ill spouse.

3. Less pay on average
While the pay gap has narrowed over time, a woman on average is compensated $0.77 for every dollar paid to a man.

These disparities make retirement planning critically important for women. Thankfully, there are plenty of options, whatever your particular situation.

If you're a working woman:

  • Take advantage of a 401(k) or other employer-sponsored retirement plan. This might be called a 403(b) or 457, but they all work pretty much the same. The contribution limits are generous, and every dollar you sock away in the plan is one you don't pay in taxes the year you make the contribution.
  • Many employers offer a 401(k) match. A match is like free money, so contribute at least the amount you need to get the full match from your employer.
  • Know your employer's vesting schedule. This spells out what percentage of your retirement plan match you can take with you if you leave your employer. By knowing your employer's vesting schedule, you can plan time out of the workforce while maximizing your benefits. Women who join and then leave the workforce without knowing their vesting schedule may be giving up hard-earned dollars.

If you're a married, stay-at-home mom:

  • A spousal individual retirement account is a regular IRA account; it's just called that to describe how you can make an IRA contribution even if you have no earned income.
  • Stay-at-home moms (or dads) can save for retirement if their spouse has earned income. You don't need to have earned money yourself to save for retirement.
  • In order to make a spousal IRA contribution, you must be married and must file a joint tax return. Also, the working spouse must have earned more income than the amount of the spousal contribution plus any contribution made to the working spouse's own IRA.

If you're self-employed:

  • Between 1997 and 2013, the number of woman-owned U.S. business increased by 59%. Women own nearly 30% of U.S. small businesses. Yet many self-employed women don't recognize the great retirement-plan options available to them.
  • SEP IRAs and solo 401(k)s are retirement plans specifically designed to benefit self-employed people. The potential amount you can contribute far exceeds the amount you could contribute as someone working for a separate employer.
  • Contributions to these types of retirement plans are generally 100% tax-deductible to your business, and investment earnings in these accounts grow tax-deferred.

Foolish final thoughts
Don't let the gender-specific financial-planning challenges you face as a woman prevent you from retiring on your terms. Empower yourself by putting a strategy in place and acting on it. Years down the road, you'll be so glad you did!

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Follow Nicole Seghetti on Twitter @NicoleSeghetti. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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