Are you afraid of running out of money in retirement? If so, you’re not alone. And it’s not just a problem for women who live paycheck-to-paycheck. Over half of people (55 percent) with $50,000 to $250,000 in investable assets answer the question with a resounding yes, according to a report from Merrill Edge.
The concerns aren’t overblown. More than four in five women simply aren’t saving enough — or preparing enough — to meet their needs later in life, according to different research from Aon AON +0.55% Hewitt. “When you reach 65 now, the odds are your longevity is at least 85,” says Jane Bryant Quinn, author of the new book “How To Make Your Money Last,” and recent guest on HerMoney podcast (and, not to mention, my long-time mentor and friend). “In the past three decades, the population of 90-years-olds has doubled, and in the next two decades it’s going to triple and [those people are] most apt to be women. So when you’re saying, ‘This is how much money I have at 55 or 60 or 65…’ when your paycheck stops, you are going to live another 20 or 30 plus years — and that’s what brings you up short.
How am I going to stretch my money over that period?”
While women are participating in their employer’s 401(k) plans at the same rate as men (79 percent), according to Aon Hewitt, they’re contributing a smaller share of their wages: 7.5 percent of their salaries versus 8.7 percent of men’s. Couple this with the fact that women, on average, also earn less to contribute (in 2015, women earned 83% as much as men, according to new data from Pew Research Center) and you come out with lower 401(k) balances. Last year, women had an average plan balance of $71,060 compared to $119,150 for men. Do the math and that’s a difference of $48,090.
So how do you make your money last longer than you do? Here, three key moves.
1. Meet the match and work to max.
If your employer offers a retirement plan, your first goal has to be to contribute enough to grab any matching dollars, and your next goal is to max out your account. This year, if you’re under 50, you can contribute a maximum of $18,000 to your 401(k), and if you’re 50 or older, $24,000. Even if you increase your contribution by just $100 a month (which will cost you $30,000 over the next 25 years), it’ll amount to nearly $100,000 (assuming an 8 percent annual return) more for retirement. Go a step further by opening an additional retirement account, like an IRA, and work towards maxing it out year in and year out, too.