How Women Can Catch Up on Retirement Savings
Because women live longer and earn less money than men, they need to save $126 for every $100 men save in order to have a decent standard of living in old age. And the biggest financial challenge women face is longevity – we live longer than men and are more likely to end up alone in old age. So how can women build a bigger nest egg? Here, financial security expert and two-time New York Times bestselling author Pamela Yellen offers strategies to help women close a gender savings gap.
Know the difference between saving and investing – Money put in savings is money a person doesn’t want to (or can’t afford) to lose. Money invested is subject to loss. Most people today “invest to save,” but they have no idea what their nest egg will be worth when they plan to tap into it. The bottom line: Money a person cannot afford to lose should not be invested in stocks, real estate or other traditional investments.
Don’t wait to pay down debt before saving – Often people think they must pay down their credit card balances and other debt before they can increase the amount they save. But that’s not necessarily true. Case in point: A woman in her 50s was paying $600 to $800 a month more than the minimum payment due on her credit cards. She discovered that by cutting back to the minimum payment and putting the difference into a guaranteed savings vehicle, she could have a nest egg worth about $50,000 more than she otherwise would when she retires at age 65.
Look beyond traditional saving and investing methods – Many people do not realize there are proven and time-tested ways to grow a substantial nest egg without the risk or volatility of stocks, mutual funds, real estate, and other investments. Yellen says there’s a strategy of using the one asset class that has increased in value during ever period of economic boom and bust for more than a century: dividend-paying whole life insurance. A dividend-paying whole life policy grows by a guaranteed and pre-set amount every year. The growth is exponential, meaning it gets more efficient every single year the policy is held. This gives some protection against inflation and provides peak growth at the time most people need it most — retirement.
“By saving instead of gambling, hardworking women can provide for their financial future,” Yellen says. “It only takes know-how, and the willingness to try something that’s time-tested but different from conventional, unpredictable investing strategies.”