Women and men should save differently for retirement – Women earn less over the course of their lifetimes and end up with less retirement savings than men. What can they do to ensure they don’t run out of money in retirement?
When it comes to saving for retirement, you’ve probably heard the conventional advice to max out your SRS to receive tax breaks, so you don’t have to pay taxes on your investment gains in the future and only pay half at withdrawal age.
This is all good advice, with one big caveat: Women should be saving for retirement differently than men. In a 2016 study by the National Institute on Retirement Security (NIRS) , retired women had 83% of the median household income as men the same age.
There are many factors that hamper a woman’s ability to save for retirement, including having lower lifetime earnings and longer life spans than men.
Here, we explore why women often have less retirement savings than men do, and what individuals and policymakers can do to help women save for retirement and reduce the retirement savings gender gap.
While the gender wage gap has narrowed over the past few decades, one of the primary reasons women have less retirement savings than men is due to lower lifetime earnings.
Women are more likely to take career breaks, leave the workforce entirely or work part-time to take care of children or family members.
Lower lifetime earnings translates to lower retirement savings for women, especially when it comes to collecting CPF returns from compounding over time. Thus, one strategy recommends that women front load their CPF contributions in their early 20s and 30s before they have children, so that the additional savings are given a lot more time to compound.
For women, saving for retirement can be tough when the motherhood penalty impacts both their lifetime earnings and their retirement savings. Saving for retirement can be a daunting task for most people, especially if you’re told you need to front load your contributions early in life and invest for a longer time horizon. However, for women it may be essential to start saving as much and as early as possible to avoid running out of retirement savings later in life.
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