Make Today the Day: Figure out where your future paycheck will come from!
By Lara Hinz, Director of Programs, Women’s Institute for a Secure Retirement (WISER)
Preparing for retirement can be a challenge for everyone, and women especially face unique hurdles.
The key factors affecting women: living longer, earning less, taking time away from work to provide family care, having less retirement income, and working part-time without benefits. These factors can make it difficult to save enough income that will last 20+ years in retirement, but it also makes preparing and planning today that much more important.
Long-term financial planning can be overwhelming, but the biggest mistake both women and men make is letting days, years, and even decades go by without figuring out how much income they will need and how much they will be able to afford in the future. Here are five ways to get started:
- Understand where the income is coming from: Find out about your sources of income and how much you can expect to receive. Follow the trail of current and past employer plans and review your Social Security benefit, which you can do easily at www.ssa.gov/myaccount.
- Learn how much you will need to have a comfortable retirement: The big question is whether your guaranteed sources of income—like Social Security—combined with retirement accounts and savings will be enough to cover basic expenses. Some expenses may go down, but others, especially health care costs, may go up significantly. Other factors include how long you will be retired, investment rates of return, and inflation. If what you have so far does not seem like enough, make a plan to work another few years if you can or increase your savings. Online calculators can also help. If you are considering an annuity, WISER’s “Your Future Paycheck Calculator” is also a great planning tool.
- Take advantage of retirement benefits available at your workplace or set-up your own retirement account: Research confirms that saving in a workplace retirement plan is one of the most successful ways people can save. Ask about plans offered through your employer. If your employer adds matching contributions, that’s free money! Contribute enough to get the full match. If your employer doesn’t offer a savings plan, consider opening up a Roth Individual Retirement Account (IRA).
- Find out if you qualify for the Savers Tax Credit: The Saver’s Tax Credit is available to eligible individuals who save for retirement through contributions to IRAs and 401(k) plans (or similar workplace retirement programs.) Many people who would qualify for this credit, however, know little about it. Check out WISER’s fact sheet to see if you qualify.
- Sound your own alarm! This is your wake-up call—don't put it off! Many women face challenges meeting retirement income needs, but educating yourself now and setting savings and investment goals will get you on the right track. For more information on all of these topics, visit www.wiserwomen.org.
There’s never a perfect time to figure it out, except for right now!