2018 Update: Check out our discussion on the FIRE movement (financial independence retire early) for beginners!
How much should you be saving for retirement? Are there savings benchmarks by ages? Is saving different for women? These are all questions that come up frequently (and no one really has all the answers) that I thought we should talk about them today. (Pictured: Marc by Marc Jacobs Wallet, on sale at Bloomingdale’s — was $148, now $103.60.)
A few notes from poking around the Internet:
– According to the Department of Labor, on average women live longer than men, invest more conservatively, work fewer years (or work part-time/freelance jobs without access to a retirement plan). Joy! MoneyLiving notes that women also have higher health care expenses, in part due to maternity expenses, but also higher premiums.
– According to CBS Money Watch (in an article not aimed at women), if you want to retire by age 65 and you start saving at age 25, you should save 15% of your income (that’s a bit more than the 10% I’ve always heard is standard, and that’s a young age — if you start saving at 35 and want to retire at 65, the percentage goes up to 24%). WSJ MarketWatch (again, not aimed at women) notes that by age 35 you should have saved 1x your income, and by age 40 you should have saved 2x your income; Time agrees.
– If you just want to know where you stack up with the Joneses, Learnvest did a survey a while back that said how much people had saved. 72% of respondents 25-32 had $49,999 or less saved in their 401Ks/IRAs/etc.
So here are the questions, ladies: How much are you saving? What time do you want to retire? (Or, do you expect to keep working well past age 70?) Have you changed your savings goals with the hope/knowledge/expectation of taking any time off for family issues (either to care for your children or your aging parents)? Particularly for the readers who are older, with kids — how are your retirement savings? What’s your advice for the younger readers?
For my own $.02: I barely thought about retirement in my 20s, and I regret that. I saved a lot of each paycheck (after tax) once I was out of law school, but kept most of the money in low-interest money market funds. I didn’t start contributing to the firm’s 401K until I was 27! Looking at the info above (and thinking about my personal friends, and you readers, and the other stuff I’ve read) I think the most daunting part of the various info I found is how from age 35 to age 40 you’re supposed to increase your retirement savings from 2x your salary to 3x your salary — I can’t help but notice how that time frame also overlaps with prime child-rearing time. A lot of mothers either aren’t working, or aren’t working full-time with access to a retirement account — and even if they are working, with so many extra kid-related expenses it seems unlikely that anyone is saving as much as they were in their 20s. I suppose interest/market gains can account for a lot of that jump from 2x-3x, and I know that child-rearing expenses aren’t unique to women — but I think that the best advice anyone can give women is this: If you are in a position to save a lot for retirement, today, then do it — save as much as you can, as early as you can, whether in tax advantaged accounts (401k, IRA) or in after-tax accounts (regular investment accounts).