Single Women and Retirement

The current U.S. financial crisis should be a wake-up call for everyone but especially single women, a group that includes single, never married, divorced, widowed and separated. In fact, most women seem to be no closer to understanding the importance of retirement savings than they were 12 years ago. They still lag well behind men.

Consider this finding from one study: single women say — in overwhelming numbers — that they know 401(k) plans and individual retirement accounts are the primary sources for retirement income but only about two-thirds contribute to a 401(k).

When it comes to retirement, most single women report they are “just getting by” (33 percent) or working hard at “paying off debt” (30 percent). Only 17 percent say they're “saving for retirement.”

How can this be? Earlier in my career, part of my job involved convincing eligible employees to contribute to the company's 401(k) plan. I remember hearing every conceivable excuse for not making even the tiniest of contributions. From comparing notes with peers in our industry, little has changed. But contributing to a company-sponsored 401(k) plan — financial crisis or no financial crisis — remains an excellent way to save. Where else will someone not only match part of your savings but pay you interest on both?

Although retirement savings sounds easy, it's not. Most experts say competing financial priorities pose formidable barriers. I suspect that's why about 56 percent of women say they are more interested in higher pay to put food on the table or to pay rent or make a house payment than retirement savings and benefits.

I also think we've made things more difficult for these women by focusing so much on plan participation instead of outcomes and not finding more ways to help women create an emergency savings cushion. After all, 401(k) investments aren't designed for meeting short-term unexpected needs and crises but are savings for the long haul in accounts that restrict withdrawals for precisely that reason.

Instead of trying to get folks enrolled in 401(k) accounts, maybe we should first help them open and begin a pattern of contributing to high-yield savings accounts. Then when that first emergency arises, they won’t have to think about tapping their 40l(k)s. Sadly, as long as withdrawal and loan options are available, employees will treat 40l(k) plans like savings accounts. The pressure is even greater on single women who are their families' primary breadwinners.

It might also be time to change how we save, perhaps setting the initial goal as $1,000 saved in the bank versus six months of salary. Look for a bank and account that pays a competitively high rate of interest and then leave the money alone and watch it grow through compound interest.

Some other tips:

• Calculate retirement savings needs and create a savings plan to achieve them.
• Get educated – make it your responsibility to learn about your employer retirement plans.
• Seek a balance between immediate needs and retirement saving.
• Avoid borrowing or withdrawing from retirement accounts before reaching retirement age.

These prudent steps will reap huge dividends down the road and put you in the driver's seat of your financial destiny versus being driven by your debts. As George Washington once said, "Worry is the interest paid by those who borrow trouble."

Linda Carter, Client Services Manager