There are plenty of good reasons to get married, and while they're not all romantic (think tax benefits and health insurance), the idea still appeals to a good 50% of the population. But among adult women, the allure of marriage may be wearing off. For the first time in U.S. history, there are more single adult women than married women, and while some remain unwed as a matter of circumstance, for others, it's an active choice. But unless you happen to be bringing in the big bucks, being a single woman can lead to some long-term financial woes.
Women are still falling behind
While there are always exceptions, the average woman earns only 76 to 79 cents for every dollar her male counterparts bring home. It's not surprising, then, that women also tend to have less money in retirement than men. Furthermore, fewer retired women receive income from pensions than men, and women are more likely than men to underestimate their life expectancies.
Not only does the average single woman have to save for retirement on one salary, but she most likely has to do so on a lower salary. Imagine a single male and female working in the same industry. If the man earns a lifetime average of $100,000 per year while the woman earns only $76,000, that's an extra $24,000 in salary each year for the man to allocate to retirement. Add in the fact that women tend to outlive men by almost five years on average, and it's no wonder so many single females struggle to save enough to support themselves in retirement.
But women make smart choices
Thankfully, the outlook for single women isn't all bleak. While their salaries may be lagging, women are smart about saving for the long haul. According to a recent Vanguard study, women are more likely to take advantage of employer-sponsored retirement plans than men. In 2014, 81% of women earning between $50,000 and $74,999 participated in such plans, whereas only 62% of similarly paid men opted in. And across all income levels, women managed to save 7% to 16% more than men despite earning less money on a whole.
Start saving immediately
No matter how much you make, if you're facing retirement as a single woman, your best bet is to start saving as early as possible. Even if you're only able to allocate a small percentage of your salary to retirement, if you invest it from the get-go, you can amass a nice little nest egg over time. Saving $2,000 a year starting at age 25 will give you over $500,000 by the time you reach 65 if your investments generate an 8% return, which is feasible with a stock-heavy portfolio. But if you wait till you're 45 to start saving that $2,000, you'll have just over $90,000 by the time you hit 65, even if your investments do just as well.
Your goal in saving for retirement shouldn't just be to have enough money to pay your bills; it should be to outpace inflation and retain as much buying power as possible when you're living on a fixed income. For this reason, it's important to choose investments that will yield the highest results. If you're several decades away from retirement, the majority of your portfolio should be in stocks, which have historically generated the highest returns. While stocks are riskier than bonds, if retirement is far off, you've got time to ride out your fair share of market downturns before you actually need that money. Remember, your stock positions can go up and down as much as they want, and you won't gain or lose a cent unless you sell anything off -- which you shouldn't have to do as long as you're still working.
As you get closer to retirement, you'll want to shift your investments into safer alternatives like bonds. But as long as you have 10 years or more before you're set to retire, your best bet is to concentrate on stocks. With our $2,000-a-year savings example, we saw how an 8% return resulted in more than $500,000 over a 40-year timeframe. But if you replace that 8% return with a 4% return (which is what you're more likely to get if you stick to conservative investments like bonds), you'll have an ending balance of just $190,000 -- less than half of what a stock-heavy portfolio would've given you.
While being an unattached female might put you at a certain economic disadvantage, there's an upside to remaining single. You can change jobs, travel, or relocate on a whim without having to worry about a spouse. And the more you're able to focus on your career, the better positioned you'll be for a retirement that's as fulfilling as it is financially secure.