There is a lot for anyone to think about when it comes to retirement planning. Percentages to contribute, years to work, social security benefits to consider; it’s a lot to take in, and according to recent research commissioned by my firm, women differ from men in their approach to this process*.
Our research found that men are more likely to prioritize long-term finances, and they claim they are more likely to consider themselves as knowledgeable in choosing investments to reach their retirement goals. They’re also more confident in their investment selection than women. However, industry research* shows women are savvy investors. This makes it all the more troubling that when it comes to monitoring the progress of 401(k) accounts, only one in five women make it a priority.
Being over confident or lacking confidence can be problematic regardless of your sex when managing money. However, I’d like to offer three steps that women (and their male peers, for that matter) can take to start planning for a comfortable retirement today.
1. Get Professional Help
On any journey, it’s best to have a guide who knows the landscape to help you find your destination. It follows, then, that anyone seeking a comfortable retirement would seek out help from professionals who understand how to make the most of a 401(k) plan, other sources of retirement income, and early investment opportunities.
According to our report**, only 29% of Americans feel comfortable planning for retirement using the resources they currently have. If you fall into the other 71% who aren’t confident,* finding help might be as simple as asking your employer if your 401(k) service provider can help. Some providers offer one-on-one consulting to help individuals chart their own ideal path to the retirement of their dreams, and that counseling can make all the difference.
2. Start Early
In the very same report, we found that 43% of Baby Boomers wished they had started saving for retirement earlier in life. I believe many feel this way later in their careers when they see how their retirement dollars grow, and how much growth they could have seen had they invested sooner.
Over the years, the money you contribute grows through the investments in your 401(k) plan’s funds. Money contributed earlier in your career has more time to grow and works harder for you through compounding interest. Those dollars contributed earlier end up being worth more to you than what you save later, so don’t wait. Start saving now.
3. Save More
Of course, you may already be saving, and that’s good. But you could always save more, and just as money compounds over time with interest, more money compounds even more. Even a few percent increase in contributions could result in significantly higher savings in retirement. The Plan Sponsors Council of America suggests that the average savings rate in the United States is 6.8%***, but the more you save, the more you can make retirement as comfortable as it can be. Increasing your savings with time will give you a better chance of saving what you need to live your ideal retirement, without settling.
Visualizing your future self, as well as the help of online tools, can help you determine how much you should be saving based on your budget, how long you’ll be working, and your specific plans for retirement.
Because ultimately, that’s what this retirement planning is all about: Setting goals, and then making your dreams a reality. Don’t lose sight of what it means to you to have a comfortable retirement, and keep that vision in mind as you start working toward it today.
*Barber, Brad M., and Terrance Odean. “BOYS WILL BE BOYS: GENDER, OVERCONFIDENCE, AND COMMON STOCK INVESTMENT.” The Quarterly Journal of Economics (2001): Https://faculty.haas.berkeley.edu/odean/papers/gender/BoysWillBeBoys.pdf. Web.
**2016 Fisher Investments 401(k) Solutions 401(k) Wellness in the Workplace Survey Report
**Plan Sponsor Council of America, 56th Annual Survey reports on the 2012. https://www.psca.org/401-k-plans-are-working
About the Author
Nathan Fisher currently serves as Managing Director, 401(k) Solutions for Fisher Investments. Nathan started his Fisher Investments career as a Client Operations Associate in 2006. During his tenure, Nathan has served in a wide variety of roles—Investment Counselor, Account Executive, Marketing Associate, Trader, Research Analyst, and Regional Sales Support Team Leader. He received a Bachelor of Science degree in Electrical Engineering from the University of California, Davis and a Master’s of Business Administration from the UCLA Anderson School of Management at University of California, Los Angeles.