Women and the Retirement Shortfall – are Your Savings up to Par?

Published on April 4, 2019

According to a recent survey by Aon, many women who are planning to retire at age 67—the full retirement age for people born in 1960 and later—may also be facing a difficult choice: to ramp up their retirement savings between now and then, or delay their retirement date.

Aon, a retirement consulting firm, analyzed 2017 records for 1.3 million individuals as well as data from the Bureau of Labor Statistics for the survey. They concluded that 70 percent of the women surveyed will have retirement income shortfalls if they retire at 67 years old. That savings shortfall is significant—by at least twice the participants’ annual salary.

One contributing factor is the enduring wage gap; women in the U.S. generally earn 80 cents to each dollar a man earns. Additional factors are the work hiatus many women take to raise children or care for family members, and women’s longer life expectancy (around 81 vs. 76 for men). For women who have struggled to save, these all add up to less-than-ideal retirement finances.

Aon’s analysis states that on average, women should have saved an amount 11.6 times their last annual salary by age 67 in order to retire. Women’s current savings rates are actually much lower, with an average of approximately 7.6 times their salary saved by then. Overcoming that shortfall means delaying retirement or saving more money while they are still working. When saving money for retirement, they should invest it well to earn more return on those savings.

Closing the retirement savings shortfall through self-direction

Of course, planning to save starts with a financial plan and an idea of how much you will need to live comfortably during retirement. Once your financial plan is in place, it’s time for the investment strategy to reach your savings goals. It would be wise to consult with your trusted financial advisor to develop this plan.

Although workplace retirement plans are a helpful savings and investment vehicle, anyone can open an IRA to save for retirement. For those women who want to take control of their investing more directly, and who know and understand alternative assets, opening a self-directed IRA is a great start; self-direction puts the power of one’s investing savvy to work.

In addition to putting 10-15 percent of your salary in a 401(k) with its limited investment options, you could fund a self-directed IRA and invest in a more diverse range of assets. These include real estate, secured or unsecured loans, private equity, precious metals, limited partnerships, and more. You can grow your retirement savings in more diverse ways than with traditional brokerage accounts that only allow stocks, bonds, and mutual funds, and self-direction puts you in the driver’s seat when it comes to making your own investment decisions.

When you open a self-directed IRA with Next Generation, you’ll also get a high level of client service and education about the many options and benefits of self-direction as a retirement strategy. You’ll find a plethora of information on our website, from our whitepaper library to our on-demand webinars. Our helpful team is also available to answer your questions and help get you started. Contact Next Generation at NewAccounts@NextGenerationTrust.com or call 1.888.857.8058.


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