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Women at Work - Planning For Your Retirement

Posted May 22, 2018 by Sporty Dave to Financial Advice 0 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

There are more independent working women than ever before in Australia. Even if a woman is married, she will likely outlive her spouse.

This means she will likely need to depend on her own retirement money just to survive.

Either way, women in the workforce must plan for their retirement as early as possible. Some women want to retire at age 55 while others might retire at age 65.

But if you do not have a plan for your retirement, you will be working until the day you die or when you can no longer work due to poor health.

Financial Planning for Retirement

You need to think about which age you want to retire on and the life expectancy that you’re likely going to have after you do so. For example, a woman who retires at 66 or 67 years old will probably live another 20 to 22 years on average.

If you plan to retire within that age range, then you need to financially prepare for surviving another 20 to 22 years after you retire.

Remember if you retire earlier than age 66, like at age 55, then you will need to have a lot more money saved because you will likely live another 30 to 35 years. 

Calculate all the estimated monthly expenses you will have in your retirement. Multiple this number by 12 and then multiply that answer by your expected years of life expectancy in retirement.

This will be the minimum amount of money you will need to save before you reach your retirement age.

If you own your home outright with no mortgage, then your expenses should be reasonable.

The Challenges Women Face

The Australian Institute of Superannuation Trustees stated recently that large numbers of Australian women continue to be unprepared when they reach retirement age.

They face many financial hurdles which force them to continue working wherever they can. What’s of equal concern is that there seems a substantial gap between men and women when it comes to superannuation earnings.

Women don’t appear contributing as much toward their pension fund as men.

There are two main reasons for this: women still get paid lower wages than men and women spend more time away from work because of pregnancy.

Both of these setbacks make it challenging for women to contribute enough money into their pension fund so that they can have a comfortable retirement. 

Retirement Preparation Strategies

Women need to have a retirement preparation strategy which they take seriously when they are younger.

Whether a woman is age 20 or 45, it is never too late to start saving. Of course, a younger woman can save smaller percentages of their annual income because they have more working years ahead of them.

An older woman in her 40s will have to save a more significant percentage of her annual income to live comfortably at a retirement age of 65.

Let’s look at some retirement savings' strategy examples. Now, let’s assume a woman makes $40,000 per year on average before taxes.

If this woman is in her 20s, then she should save between 10% to 15% of her annual income until retirement age.

This will leave her with roughly $36,000 per year.

Alternatively, a woman in her 30s who starts saving will need to put aside 15% to 25% of her annual income.

This will mean that she’ll only have $30,000 or $34,000 per year for her current living expenses.

As for a woman in her 40s who starts saving, she will need to put aside up to 35% of her annual income.

This leaves her with $26,000 in living income until retirement. Unless an older woman is living modestly, it will be more difficult for her to save this much money from her paycheck per year.

For this reason, it is better to save earlier so that you can spend more of your annual income.

Image: Pixabay CC0  License

About Sporty Dave: David is an Australian blogger with an interest in finance and family and writes for Born 2 Invest and Self Growth.

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