Provided by Rick Hughes
Debt reduction. Less debt leaves more money to save. One recent survey suggests that women amass less debt than men: in reviewing credit trends for 2013, Experian found women were 4.3% less indebted than men overall and that female borrowers missed fewer mortgage payments and took out smaller home loans. As for handling a student loan burden while saving for retirement, most federal college loans are eligible for at least one of the new income-based repayment plans which cap monthly payment levels based on family size and income.2,3
Estimating high. Here are seven words you will rarely (if ever) hear from a financial professional: “You are saving too much for retirement.” Most people save too little, and here is a case where erring on the side of caution is no error at all. Building your retirement nest egg through multiple vehicles (an IRA, a workplace retirement plan, an equity portfolio, savings accounts) can contribute to the generation of a larger-than-necessary retirement fund.
Saving 10% or more of your income as soon as you can. Starting early allows you to take advantage of the considerable power of compounding. Putting away 10% or 15% of your annual income into retirement accounts is not excessive; it is quite reasonable, even necessary.
As a hypothetical example, 35-year-old Christina has already saved $30,000 for retirement with the idea of retiring at 65. She currently earns $70,000 annually. A retirement income of $100,000 seems like a nice idea for 2045 and the 20 years stretching beyond that date.
Assuming a 6% return before and after retirement, Christina would need to save 17.61% of her income, or $12,329 a year, to reach her goal under such parameters.4
At age 45 she has built $152,000 in retirement savings and earns $120,000 a year. To get that $100,000 retirement income for a 20-year retirement, she still has to save 14.9% of her income ($17,928) at a hypothetical 6% consistent return to realize that objective. The lesson: save, save early, and save more.4
Asking for raises or creating new income streams. It can be hard to ask for a raise, but it is harder to live on a substandard salary or risk positioning yourself for a retirement savings shortfall. Your employer will not likely give you one out of thin air, so initiate the conversation and assert your value. Also, look for opportunities to make more money outside of the 8-to-5 or 7-to-4: speaking engagements, home organizing, direct sales, consulting and other methods.
Owning your financial life. That is to say, keep control over it. If a relationship is wonderful and intense, great, but avoid being seduced into a passive financial role in the long term. That was the default role for women decades ago when they married, but even today, when one person makes most of the financial decisions in a relationship, the other person risks moving forward in life with inadequate financial knowledge. That problem plagues widows.
Actively managing your finances also means straightforwardly addressing spending issues, debt and any other financial problems or dilemmas that must be resolved as you pursue your retirement savings goal.
Thinking positive. Saving for retirement begins by pairing the right outlook and the right actions. Stay positive; stay consistent; run the numbers and make sure you are saving enough. To find out just how much is enough, consult a financial professional who can help you assess your saving potential.
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- Aspects That Influence How Much Your CalSTRS Benefit Will Be Each Month
- White House Proposes Changes to Retirement Plans
- 6 Effective Retirement Strategies for Smart Women
- How Can Women Save More for Retirement?
- Planning for Retirement When You Are Single
- Smart Financial Moves in Your 20s, 30s, 40s & 50s
- How Can Divorced Women Achieve a Financially Healthy Retirement?
- Saving Early & Letting Time Work for You
- How to Get Started with Financial Goal Planning – The Basics
- Valuable Financial Tips That Women Should Apply In Their Lives
- Money Concerns for Those Remarrying
- What Women Shouldn’t Retire Without
- When a Minor is a Beneficiary
- Are Women Reluctant to Talk About Money?
- Who Has to Pay the Debt after You Die?
- Putting Your Tax Refund to Work
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 - tiaa-cref.org/public/about/press/about_us/releases/articles/pressrelease534.html [10/29/14]
2 - experian.com/blogs/news/2013/05/22/women-vs-men/ [5/22/13]
3 - studentaid.ed.gov/repay-loans/understand/plans/income-driven [4/9/15]
4 - msn.com/en-us/money/tools/retirementplanner [4/9/15]