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Retirement

Women get shortchanged when saving for retirement

Robert Powell
Special for USA TODAY
The No. 1 tip for women: Save early, save often and save as much as you can.

Planning, saving, investing for and living in retirement isn’t easy for many Americans. But it’s especially difficult for women, according to a new report published by the National Institute on Retirement Security (NIRS).

But that doesn’t mean all is lost for women, according to Jennifer Brown, manager of research at the NIRS and a co-author of the report, "Shortchanged in Retirement, The Continuing Challenges to Women’s Financial Future." Here’s a look at some of the key findings and what women might do to improve their odds of enjoying retirement.

Women are 80% more likely than men to be impoverished at age 65 and up, while women 75 to 79 are three times more likely. How best to avoid living in poverty?

  • Save at work. Save early, save often and save as much as you can. "The best way to retire securely is to consistently participate in a retirement plan from the start of one’s career," Brown says. "You should participate in your company’s retirement plan if you are eligible, as soon as you’re are eligible, and save as much as you can to maximize the powers of compound interest."
  • Save in an IRA. If you do not have access to a retirement plan in the workplace, Brown recommends saving through an IRA, such as MyRA. "Additionally, you may be able to soon save for retirement through a state-sponsored retirement plan in states such as Maryland, Oregon, California, Connecticut, Illinois and Massachusetts," she says.
  • Get rewarded for saving.  Many people don’t take advantage of opportunities to boost their retirement savings through the federal Saver’s Credit or do not contribute to a retirement plan, even though their employer provides a match, says Brown. The Saver’s Credit — for low- to moderate-income individuals — provides a tax credit of up to $2,000 for those who contribute to a retirement account. To get this credit, taxpayers must file a Form 8880 along with their tax return. What’s more, if your employer offers an employer match,  definitely take advantage, says Brown. 
  • Do not kick the can down the road. Retirement may be here sooner than you expect.  "Almost half of workers retire earlier than expected, due to health problems, downsizing/layoffs or the challenge of caring for a spouse or family member," says Brown.

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Labor force participation among women 55 to 64 climbed from 53% in 2000 to 59% in 2015. According to the NIRS, women may be working longer to make up for lower retirement savings over their careers and to offset investment losses from the Great Recession. So, should women continue this trend? "Without returning to the workforce, most women will not have enough money to retire," says Brown.

Jennifer Brown, manager of research at the NIRS.

Even though Social Security benefits provide women 65 and up an average of $13,824 a year, Brown says this is $10,000 less than the nationally recognized cost-of-living estimate.  "Because of this gap, women will need to rely on more than just Social Security alone," she says.

While women were somewhat more likely than men to work for employers offering retirement plans in 2012, they're often not eligible due to working part time.  “Women represent two-thirds of the part-time workforce," says Brown.   What to do? "Women who are part-time workers should strive to meet the eligibility requirements in their employer-sponsored plan, or they should save on their own for retirement, through an IRA, such as MyRA."

Don't have a 401(k) plan at work? A myRA might be right for you

Social Security is an important source of income for older households with incomes under $80,000.  "Even though Social Security keeps over one-half of women out of poverty, Social Security alone is not enough to make ends meet for all women, except married women," says Brown.  "For widowed, divorced, separated and never-married women — especially black and Latina women — these women will need additional savings ... in order to not work during retirement."

Women in the health care, education and public administration, where defined benefit pension plans are more prevalent, have higher incomes in retirement and lower rates of poverty.

Women should continue to seek out careers in these fields, Brown says. According to the U.S. Department of Labor, women have historically worked in education and health care.  And that trend continued in 2013, when 19% of women were employed in health services, 15% were employed in educational services and 6% in public administration.

"It is not surprising that women are drawn to these fields as these fields have some of highest rates of retirement coverage — and the highest rates of defined benefit plan coverage — of all the industries we examined," said Brown.

Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch. Got questions about money? Email Bob at rpowell@allthingsretirement.com.

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