Step by Step Guide to Retirement Planning for Busy Women
Retirement planning isn’t the most exciting topic (let’s be honest) but it’s one of the most important financial tasks you can do that will set you up financially for life.
The fact that you are here reading this article says this has been on your mind lately and you’re wanting to take some steps towards fixing this. I want to help you get this prickle out of your shoe and ticked off your to-do list.
Together we can work through this and get it done.
Then you can relax and look forward to a fun retirement, free from worrying about money.
Just a quick note that this article doesn’t take your personal circumstances into consideration and is designed purely to give you some ideas and a basic system to use to get started.
Please always see a professional to get advice when it comes to major financial decisions like retirement, just in case.
By the end of this article you’ll know:
- How to easily plan for retirement
- How much money you need to save for retirement
- Set up your plan to start saving painlessly now
- Have a retirement checklist to keep you on track
- Know the biggest retirement mistakes women make and how to avoid them
Retirement planning is easy when you know how. You only have to make a start, set up your system and let compound interest and time work their magic. Let’s get started.
Why Retirement Planning is Important for Women
One thing that worries me greatly when it comes to women and their money, is the fact that most are not planning properly for their retirement. This makes sense because retirement planning for women is far more difficult than it is usually for men.
Women often have majority of the unpaid tasks such as caring for children or elderly parents, still have majoity of the domestic duties and often can only work part time to fit everything in.
Because they earn less they get paid less towards retirement.
If they have a full on career and social life they don’t have the time for themselves, let alone to spend on things like planning retirement.
While they have more money, these women are lacking time and brain space to deal with their financial planning.
Single women don’t have the ability to share part of their living costs with another so there is less money available to go towards retirement.
Quite often though, women who don’t plan for retirement usually lack the financial skills to weigh up the complicated options available or leave it because they don’t earn much and they’ll worry about it later. Overwhelm sets in and it gets put in the too hard basket.
Women live longer and need to save more money
Women on average live longer than men (if you’ve ever visited a nursing home you will have seen this for yourself as the majority of residents are female). Because we live longer than men we need even more money to live on when we retire. It’s a terrifying thought that you may run out of money and even more so once you are too old and frail to go back to work!
Divorce and being a single parent
With divorce rates so high many women are left on their own with young children to provide for and aren’t putting any money away at all for retirement. This is because when you’re barely making ends meet it’s really not a priority.
These women are often working part time as well, as being a single parent in itself can be a full time job.
It is also more challenging for these women to work in well paying careers as it can be difficult to access flexible working arrangements they need to look after their children.
In Australia we have a retirement system where employers contribute 9.5% of earnings into a retirement fund. You need to earn over $450 per month to be eligible. Some women don’t clear this threshold and miss out altogether.
While earning part time wages means lower retirement contributions from their employer, it also means the loss of investment returns during this time as well. The problem is compounded.
Now there is also a growing gig economy where women are shifting to freelance work to fit in with their childcare situation and as a result they often stop contributing to their retirement at all.
Women are paid less than men
Not to mention the fact women are still being paid 14.6% less than men according to the workplace gender equality agency here in Australia.
I totally get that you’re young (ish) lol and you’ve got other priorities such as raising children and or a full on career and family life to manage but many women are now facing poverty in their old age and are totally unware of this ticking time bomb coming their way.
As you can see this is a big problem.
I don’t want this to happen to you.
Australian Millenials are one of the biggest groups facing poverty in retirement due to their decreasing ability to buy real estate.
Their retirement planning needs to be addressed urgently.
I do have some good news for you though, it’s really not as hard as you think.
If you start now with only a little bit of money saved regularly, you can have thousands of dollars extra come retirement.
Time is your best friend when it comes to your retirement planning and you can avoid a lot of these problems purely by starting earlier.
Is Retirement Planning Important?
Retirement planning is important to future you.
The day you leave work and walk out a free woman is going to be one of the happiest and also scariest days of your life.
It’s scary because that moment you walk out the door you will have no money coming into your bank account for the rest of your life.
How annoyed are you going to be with yourself when you retire and you only have $50,000 saved to last you the next 30+ years.
Right now this is easy to fix, but as time goes on you will need to save more and more to make up for the interest you have lost.
Don’t stress just yet this will still be achievable, you’ll just have to work a lot harder.
I can tell you there are many 55 year old women who, right now, are wishing that they started putting a little bit extra away when they were younger.
Don’t let time get away, take action now so that won’t happen to you.
When Should you Start Planning for Retirement?
Um, right now.
Don’t they say the best time to plant a tree was 20 years ago and the second best time is today? (Chinese proverb)
The earlier you start the easier your life will be in the future.
I can tell you that planning for retirement 5 years before you retire is way too late.
There are very limited options available to you at that stage. Even with the most expensive financial planner you can find helping you and a big salary, it’s going to be tough.
You probably have no idea what your life will be in retirement or how much money you will need. We can fix that.
Yes things will change between then and now but the most important thing here is to start. Just start and you can tweak the details as you go along.
How Much Money do you need to Save for Retirement?
Planning how much money to save for retirement is actually pretty exciting, it’s like dreaming of the day you’ll win lotto and what you’d spend the money on. The lifestyle you will live in retirement is totally up to your imagination and totally achievable with proper planning.
Make a retirement plan
Firstly you need to plan what you would like your life to look like in retirement.
Do you want to travel a lot? Spend time with grandchildren and family? Help out in the community?
Probably things you’ve never really thought about before.
Take a minute to write a little paragraph about what future you will be getting up to in retirement. Be as detailed as you can.
What does her day look like? Does she have things to look forward to? Does she still work part-time? What is different in her life compared to the life you are living now?
Her children (if she has any) will be grown up and with their own lives; she will be looking for things to do.
That costs money so we need to budget for this.
Cost the retirement plan
Think about how much money you will need to save to pay for future you’s fancy retirement.
How much will she need to live on each week?
If you plan on paying off your home by then you will only need to think about living, medical and travel expenses.
Your entertainment portion of your budget will probably increase as you’ll need to find things to do. Coffees and movies with friends become really important as social isolation is a real problem for the elderly.
Medical expenses need to be properly provided for as they will definitely increase as you age. As you can imagine it’s harder and more expensive to get any kind of disability or health insurance in retirement. (We won’t talk about life insurance lol)
You’ll really be self insuring for a lot of your own medical costs in retirement so plan accordingly.
Next you will need to think about the cost of transitioning to retirement.
You’ll want to update your car, possibly renovate your house or move to somewhere more low maintenance and maybe take a big overseas trip while you are younger.
Make sure to budget a chunk of money to do these things. Add up all the expenses you can think of and write them down or put them in your planner.
My retirement planner on etsy can help you work out the cost your retirement plans easily.
Think about assets you will have to create your own income
If you have investment properties, a stock portfolio or have a business that provides income make sure to factor this into your retirement planning as well.
Assets are anything that will provide an income source of its own, so houses have tenants that pay rent, stocks produce dividends and a business produces profits.
The key thing here is that you don’t have to work for this income it’s all passive income.
You will also have your chunk of retirement savings as well which will also produce an income stream. However, keep in mind the more of the chunk (capital) you spend the smaller the income stream becomes.
Will you qualify for any pensions?
Consider whether you will be eligible to any pension scheme either through your job or through the government?
If you aren’t sure, spend 15 minutes doing a quick internet search to see what the thresholds are today (yes they’ll change over the next 30-40 years) just to get a guide to help with your planning.
Are you going to continue to work part-time?
The easiest way to make sure you won’t run out of money in retirement is to keep working.
Probably makes you feel sick to think of working so long!
There are lots of retired women who change careers and do something they love part-time when they retire. To be clear I’m talking early retirement here not when you’re in your 90’s 😊.
Feeling useful no matter what your age is one of the foundations of self-worth (in my opinion) and being socially connected is one of the key factors in living longer.
By continuing to work you have a reason to get up every day and there are people who count on you to show up.
It also keeps your bank account happy and you can spend more without worrying about running out of money. I’d definitely consider still working a little as part of your retirement planning strategy.
How to Budget for Retirement
Calculate your retirement shortfall
Add up all the possible income sources you will have and deduct your retirement living expenses calculated above.
This is your gap.
Divide this figure by the years you have remaining until retirement to get the annual figure you need to save and then divide by the period you want to budget for (52 for weekly) save this amount each week and add it to your retirement fund.
It is critical that you never touch this money. No matter what!
Quick explanation of the 4% retirement rule
An alternative method is the 4% rule.
This is a post on its own, but it basically means that you can live off 4% of your retirement nest egg and basically not run out of money.
Each year you add a bit extra to cover inflation (cost of things going up) so your buying power stays the same.
So if you have $500,000 in retirement funds you could safely withdraw 4% = $20,000 per annum and the lump sum would last for 30 years or so.
If you want an income of $75,000 per annum in today’s dollars then you will need $1,875,000 in retirement ($75,000/4%)
FYI, these methods of calculating your retirement amount have been greatly simplified and doesn’t consider taxes, inflation (the cost of things going up), or any investment returns you will get.
My aim for you is to make this easy for you to get started.
A financial planner is always best to speak to regarding the specific details and they can make you a lot of money with the proper planning, but not everyone can afford to see one.
At least if you start saving something now, when you do have a higher income later you’ll have some money they can actually do something with.
Start Saving for Retirement Asap
Related posts: Ultimate Guide to Budgeting for Beginners
Retirement Planning Checklist
Ok, if you are still a little confused and overwhelmed here is a check list to follow to help make the process a little bit easier.
Follow these steps and take action and you’ll be in a fabulous place to start working towards your dream retirement life.
Biggest Retirement Mistakes
Worried you’re going to mess up your retirement planning?
Here are the biggest mistakes women make when planning (or not planning) their retirement:
- Not starting early enough
- Knowing nothing about the retirement system and how it works
- Having too many different retirement funds
- Understand how tax works on retirement savings
- Not keeping an amount outside retirement so they can retire early
- Paying high administration fees
- Paying for insurance they don’t need
- Choosing the wrong investment strategy for their situation
- Not having a large emergency fund to wait out stock market crashes
- Panicking and taking money out when things get rocky
- Being too conservative and leaving money in the bank
- Sticking with a poorly performing fund
- Falling for investment scams
- Relying on the government and not providing for their own retirement
- Thinking they will remain healthy and young their whole life
- Spending their entire lump sum and not putting into investments so it can keep growing
Please don’t let the fear of making a mistake stop you from starting though.
As I said earlier starting is the important part because when you have some money you can tweak your system as you learn more.
You also have some funds to work with if you decide to see a financial adviser down the track.
If you slowly worked through the above list and made sure you were avoiding these errors you would be in a stellar position come retirement.
A Final Note
So now you should know how to:
- Easily plan for retirement
- How much money you need to save for retirement
- Set up your plan to start saving painlessly now
- Have a retirement checklist to keep you on track
- Be aware of the biggest retirement mistakes women make and how to avoid them
Retirement planning can seem so confusing and overwhelming but it really doesn’t have to be.
Spending a little bit of time planning your retirement life and putting a little bit away early is a painless way to solve this problem.
You no longer have to feel dread when you hear the word retirement and from now on you can feel happy because you’ve got a financially secure retirement waiting for you.
Does this help?
If you’d like to grab a copy of my Etsy Retirement Planner to help you sort your retirement today you can get it here.
What is the biggest thing that’s stopping you planning your retirement right now?
Drop a comment below or email me and let me know!
Ps Please take some action today, it’s really important. Procrastination is the thief of your future wealth here. Retirement planning is the easiest way to earn big money for very little effort.
Take the time and set it up today.
Pps If you are close to retirement would you please leave a comment to help the younger readers out there? Thank you!