Finances

Retirement income strategies for business and career women

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This guide outlines retirement income strategies that will allow you to maximise your financial stability and security.

Retirement insecurity is all too real, and it’s even more of a challenge for women working to save for retirement. With rising inflation and cost of living and the wage disparities between men and women in the workforce, saving for retirement presents unique challenges. Read on for retirement income strategies and tips to overcome the challenges of saving for retirement.

Retirement challenges for women

Women face unique challenges in building wealth and saving for retirement. For one, women typically live longer than men, which means more active years in retirement. This can inevitably lead to running out of money during your retirement years if you haven’t planned or set aside adequate savings.

Women are also more likely to take on part-time work as their primary source of income. The problem with this is that most part-time employees aren’t eligible for an employer-sponsored retirement plan, making saving up for the future that much harder.

Plus, women are often more likely than men to reduce their hours or transition from full-time to part-time employment to care for their families. If you’re trying to save for retirement, there’s no denying cutting hours can be detrimental to achieving your financial goals.

What’s more, women also make up a disproportionate number of low-wage workers. When the job isn’t enough to provide a livable income, it can be even more challenging to focus on saving for retirement. And even though there’s still a significant number of women working in full-time roles with employer-sponsored plans, few are actively saving for their retirement.

Top retirement income strategies

One of the most effective retirement income strategies to start overcoming the obstacles in the way of your savings is to take advantage of employer-sponsored retirement plans if you have the option.

Not only can employer-sponsored retirement plans, like a 401(k), provide you with a way to save for retirement, but your employer can contribute as well. In most cases, a 401(k) comes with employer contribution matching, which means your employer contributes as much as you do or contributes up to a certain percentage of your compensation.

Here are several more retirement income strategies to overcome the challenges many women face when saving for retirement:

  • Stick to a budget: Set a budget and monitor your spending to make sure you’re setting aside a specific amount on a regular basis. By watching your cash flow and adjusting your habits, you can ensure you’re allocating an adequate amount to your savings and cutting back on unnecessary spending that could take away from your future retirement funds.
  • Avoid large purchases: Be conservative with your spending and avoid large purchases that could potentially cause you to dip into your retirement savings. Buying a house, purchasing a new vehicle, or taking out a personal loan when there’s no immediate need to can all detract from how much you’re able to save each month.
  • Consider investing: If you’re nearing or in retirement, consider investing in instruments like bonds and income-generating equities. These types of investment vehicles can often provide additional retirement funds beyond your Social Security, pension, or other savings.

Ways To Start Saving for Retirement Now

Even though it seems easier said than done, one of the fastest, most effective retirement income strategies to overcome the challenges of saving for retirement is to start putting money aside right now. You don’t have to have an actual retirement account to start saving, either, and setting aside a certain amount in a regular savings account is the easiest way to begin building your nest egg.

As you accumulate more, you can then look at available options to convert your savings into an established retirement plan. The following options are worth considering, depending on your employment status and financial situation:

  • Individual retirement accounts (IRAs): An IRA is an individual savings account that you can contribute to for future retirement income. There are contribution limits for IRAs, where individuals can contribute up to $6,500 to an IRA and those over 50 years of age can contribute up to $7,500.
  • Defined contribution plans: These encompass several types of employer-sponsored retirement savings plans, including the traditional 401(k). The biggest benefit of contributing to a 401(k) or other defined contribution plan like a 403(b) or 457(b) is that they usually offer employer matching, which means more money into your savings.
  • Guaranteed income annuities: Guaranteed income annuities aren’t employer-sponsored, so they’re available to anyone looking to supplement their retirement funds. The advantage of an annuity is that you can elect to pay into it over time.

Saving for Retirement With a Fixed Annuity

An annuity is a tax-deferrable retirement savings option through an insurance contract where you exchange a lump sum for a future stream of income. There are a few types of annuities you might look into, but fixed annuities can guarantee a fixed asset accumulation over a period of time.

As you invest your savings over time, you earn a fixed return. Because fixed annuities are tax-deferred, you won’t be obligated to pay taxes on the interest your annuity earns until you withdraw from it.

There are a few types of fixed annuities worth considering, especially if you’re looking for retirement income strategies outside employer-sponsored plans:

  • Traditional fixed annuity: These are annuity contracts where the insurance company credits an interest rate that they establish on an annual basis. Each year, the insurance provider will review your annuity contract and reset the interest rate.
  • Fixed deferred annuity: With a fixed deferred annuity, the insurance provider agrees to pay you at a minimum interest rate as your account grows, where this rate is guaranteed only for that time period. When you retire, you can withdraw from your annuity immediately or defer payments to a later date.
  • Multi-year guaranteed annuity (MYGA): A multi-year guarantee annuity provides a predetermined interest rate and guarantees it for a specified period of time, usually over 3 to 10 years. The biggest advantage to MYGAs is that they often guarantee a higher fixed interest rate over the entire contract period.

Conclusion

Even with the challenges of saving up for retirement, there are many more available retirement income strategies for women to take to ensure financial stability well into the future. Consider speaking with a financial adviser so you can take advantage of all the available retirement planning tools you need to secure your finances.

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