Invest Retirement

No Retirement Savings? Here’s How to Catch Up

Kelly Burch  |  September 4, 2022

If you're behind on retirement savings — or if you haven't set aside any money — it's never too late to begin. Here's a guide for getting started.

Women live longer than men, so we need more money for retirement. At the same time, we’re more likely to opt out of the workforce or have interruptions to our careers, meaning we earn less over our lifetimes. So it’s no surprise that we women often fall behind on saving for retirement.

“They need more money, but they’re in a situation where they’ll save less,” says Cindy Hounsell, president of the Women’s Institute For A Secure Retirement, a nonprofit focusing on the long-term financial health of women. If you’ve fallen behind on savings for retirement — or just need to get started — here’s how to make up for lost time.

Get Started Today (Yes, Today)

Many women are intimidated by the retirement savings process and delay starting until we’re on better financial ground. But the better option is get started immediately.

There is no perfect day to put aside a portion of your income each month for retirement. “If you’re waiting for that day, it’s not going to happen,” Hounsell says.

Plus, the options for retirement can be overwhelming. An individual retirement account (IRA) is a popular option, although you have to choose whether to open a traditional IRA or a Roth IRA, which have different tax advantages. If you have a 401(k) offered through an employer, it’s a great idea to take advantage of it, especially if the employer matches a percentage of your contributions.

But looking for the perfect plan can also waste more time, so do a quick search for a low-fee, low-minimum plan and start tucking money away today. In general, Hounsell says a Roth IRA is a good place to start.

“Fees are important, but starting is more important than fees,” she explains.

Once you’ve started and are more comfortable with saving, you can change to a plan that better suits your particular needs if need be. Put away whatever you can afford, working toward the goal of saving the recommended percentages based on your age and when you’d like to retire.

Hounsell puts it simply.

“This stuff is not as hard as people think,” she says. “All you have to know is put some away and don’t pay a lot in fees.”

Be Realistic, But Make Big Changes

If you’re starting to save for retirement in your 40s or 50s, you’re going to need to be extra disciplined and aggressive in order to save an adequate amount.

“You can pretty much always fix it,” Hounsell says, “but it may mean drastic cuts (to) what you’re doing.”

Here’s a comparison to get you started: If you start saving for retirement in your 20s, you need to put aside 10  to 15 percent of your gross income to retire comfortably. But if you wait until you’re in your 40s, that number jumps to 25 to 40 percent; and if you are 45 or older, it’s 40 to 60 percent.

One woman that Hounsell worked with sold her car and used public transportation in order to save more each month for her retirement. Others downsize their house or stop eating out. Although these changes can be painful, the reality is that people who are making up for lost time need to contribute extra to their retirement accounts in order to live comfortably in retirement.

“People think they can catch up, but it’s hard to [do so] unless you’re doing something drastic or changing your lifestyle,” Hounsell says.

There are also two factors that can dramatically affect your retirement savings: compound interest, which helps grow your retirement savings more quickly; and inflation, which means that your money will actually be worth less 20 or 30 years from now when you retire.

Keep in mind that the IRS allows those who are “catching up” to contribute more to their retirement plans. For example, if you’re over 50 you can contribute up to $7,500 a year to your IRA, $1,000 more than people under 50, who are able to contribute $6,500 in 2023.

“That’s your goal,” Hounsell says. “You have to reach for that.”

Prioritize Yourself and Ask Tough Questions

Women too often fall into the trap of taking care of other people’s needs before their own. If you’re helping out adult children or paying bills for your parents before contributing to your retirement, that’s got to change.

“You always have to focus on yourself first,” says Joanna Leng, a financial adviser in Singapore who left her position as a Senior Estate Planner at Rockwills to begin her own practice working specifically with single parents.

Just as you’re told to apply your oxygen mask before assisting others on a plane, you must get your own financial house in order before supporting your loved ones. “If you cannot take care of yourselves you cannot take care of (others),” Leng explains.

In the same vein, important to talk openly about whether your partner is contributing to a retirement plan. Often, partners will split household bills based on take-home pay, and you may not realize your partner is saving 15 percent while you aren’t saving at all, Hounsell says.

“You need to know that,” Hounsell says. If you’re splitting expenses, may sure you are both taking equal opportunity to save for the future.

With single parents, there can be a temptation to put their children’s needs first.

“(It can be) very emotional,” Leng says, pointing out that parents often feel guilty for having to work, or for raising their child without a second parent, and try to overcompensate by spending on the child.

But for single parents there is an even greater need to have sound financial planning, since they’re unable to fall back on a partner’s retirement savings, Leng says.

“Ultimately it’s even more pressure on them,” Leng says. “They need to know where the money is going to come from.”

While starting retirement savings early is really your best bet, Hounsell stresses that it’s never too late to start.

“You definitely have time,” she says. “You better decide to save and stick to it.”

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