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The Importance of
Your 401(k)
Yo, ladies! It's time to adopt a "me-first" attitude when it comes to saving for
retirement.
There are a number of compelling reasons why women should be especially diligent about
saving in a 401(k) or other tax-deferred retirement plans, even if they have other demands
on their money.
On average, women live longer, earn less (and therefore may get smaller Social Security
checks), and are single parents more often than men. They change jobs more often and spend
more years out of the work force than men do, and are more likely to work in "pink
collar" industries that do not offer pension plans.
And yet, women often don't focus their attention on saving for retirement. Other
priorities get in the way, or they assume someone else will take care of it.
"Women are great at putting themselves last," said Debra Nichols, director of
women's financial advisory services at First Union. "They have a different approach
(to finances) and need to be approached differently" by those who help them plan.
Live Long and Prosper
On average, women live longer than men, so women need to plan for a longer retirement.
"If you live longer, you're going to need more money," said Martha Priddy
Patterson, author of The New Working Woman's Guide to Retirement Planning: Saving and
Investing Now for a Secure Future. Some of this money will come from Social Security,
but certainly not all of it. Women need to find other savings vehicles, and tax-deferred
plans like 401(k)s are an excellent place to start.
Women should be sure to take their longer life expectancy into account when estimating how
much money they will need in retirement, said Patterson, director of employee benefits
policy analysis at Deloitte & Touche. Some retirement calculators may use an average
life expectancy for men and women, which is lower than that for women. If you plan to live
until you're 82 and end up living until you're 85, you'll run out of money.
According to a recent survey by the Employee Benefit Research Institute, men are doing
slightly better than women at planning for retirement. The 1999 Women's Retirement
Confidence Survey released last November found that 70% of women and 71% of men were
saving for retirement. But, fewer women than men (44% compared to 54%) tried to estimate
how much income they would need in retirement.
When asked if they felt confident they were doing a good job of preparing financially for
retirement, 21% of women said they were "very confident" compared with 29% of
men. But when "retirement readiness" was measured, only 7% of women and 8% of
men were found to be doing a "very good" job. A "good" rating went to
28% of women and 34% of men, while 34% of women and 29% of men scored
"adequate."
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