Seven Ways Women Can Make Sure They Stay on Track for Retirement

When planning for retirement there are quite a few unique challenges that women face. How can you stay afloat and on track for retirement?
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By Katie Marsden, CFP®

2020 is having a big impact on the financial wellness of women – how could this affect your retirement?

When planning for retirement there are quite a few unique challenges that women face relative to men. According to a study done annually by Vanguard, “How America Saves,” women typically have half the retirement savings as their male peers. Some of the factors that contribute to their decreased savings are the gender wage gap, time out of the workforce, being caregivers, and a longer life expectancy. This year some of these challenges have intensified and become even more glaring in the wake of the COVID-19 pandemic.

Katie Marsden

Katie Marsden, CFP

The Labor Department recently reported that in September alone 865,000 women over age 20 dropped out of the workforce in the U.S. That’s compared to 216,000 men. This figure is staggering. Why are so many women leaving the workforce? There are a couple of factors contributing to these shocking numbers.

For starters, the industries that are struggling because of the pandemic – for instance, restaurants and certain retail sectors – are the same industries to which women have gravitated. And the top two occupations for women in the U.S., teacher and nurse, are arguably among those the pandemic has made the most stressful.

In addition, more women are leaving the workplace for other reasons, such as a lack of childcare. School closures or virtual learning and the reduced capacity of some daycare facilities have pushed working parents to the brink, especially those who are essential workers and still have to show up in person (like our nurses and our teachers). The options for parents have been limited, prompting many women to leave the workforce altogether in the face of trying to juggle virtual learning, conference calls, cooking meals, serving as entertainment coordinator, and more.

As far as financial wellness, how do we stay afloat and on track for retirement? Only time will tell how long it takes for the economy to fully recover, the workplace to return to “normal,” and for many individuals and families to get back to a comfortable place. It is easy to feel concerned about the big picture and uncertainty can bring about fear and anxiety. What can women do to make sure we stay on track toward retirement goals five, 15 or 20 years down the line?

Revisit your plan: If you are a few years from retirement, revisit your plan. Are there any changes to your plan, levers to pull, or adjustments to make that would allow you to possibly retire earlier than intended?

Use your emergency funds: As an advisor, I feel like a broken record talking about an emergency fund, but this situation stresses its importance. Having three to six months of living expenses available in cash if you lose your job or would like to take time to care for family members can give you greater flexibility.

Review your expenses: When you are unemployed, and income is no longer coming in, every little bit you can save can go a long way. It is a good exercise to review your spending. Take a fresh look at your bank account and credit card statements to review what money is going out. Do you have subscriptions or services that auto-renew that you could put on hold? Are there expenses that now fall into the want category that you could cut back on for a period of time?

Track your spending: Are there areas of your budget that can be freed up if your spending habits changed this year? Did you do more dining at home and spend less money on travel? Are there areas where you have been able to save this year? Is there any newly available cash flow as a result?

Consider rolling over your 401(k): Consider the costs associated with your 401(k). Does it make sense to transfer your funds to an IRA? Keeping costs down can have a big impact over time.

Avoid raiding your retirement savings: It can be tempting to use the funds from your 401(k) or other retirement plans to help make ends meet in the near term. To the extent you are able, avoid using your retirement funds to keep you afloat. Keep in mind that if you are under 59 you will pay a penalty to use these funds. It is important to remember that you pay income tax when you withdraw funds from your retirement accounts, and surprise tax consequences are something to avoid. If you do use your funds, make a promise to pay yourself back. For funds you use from the account, within the limits of repayment, commit to increasing your savings once you are in a more stable financial situation.

Consider how the CARES Act can help: The CARES Act provides expanded distribution options and favorable tax treatment for up to $100,000 of coronavirus-related distributions from an eligible retirement plan to qualifying individuals.

Finally, the Families First Coronavirus Response Act requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specific reasons related to COVID-19. It is worth understanding the law and whether you are eligible for such leave rather than exiting the workforce. While this is not an option for everyone, it could provide relief to parents who are struggling to find care for their children (or who may have caregiving responsibilities for elderly parents or other vulnerable family or friends).

2020 has been a challenging year, particularly for women who find themselves no longer part of the workforce either by choice or circumstance. It is important to remember that this too shall pass, and that with thoughtful planning and consideration you can remain on track with your retirement planning goals.

About the author: Katie Marsden, CFP®, CDFA®

Katie Marsden, CFP®, CDFA®, is a Wealth Advisor at Buckingham Strategic Wealth, where she helps retirement savers design, build and protect a financial life plan that balances their present needs with their long-term goals in pursuit of a future they can feel confident about.

Important Disclosure: The opinions expressed by featured authors are their own and may not accurately reflect those of the Buckingham Strategic Wealth®. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. The analysis contained in this article may be based upon third-party information and may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. IRN-20-1559