At the beginning of 2024, the average Social Security benefit was $1,907 per month, about $23,000 of annual income according to the Social Security Administration (SSA). Even for a person with additional income, this is a low amount if you are looking to have a good retirement with all expenses covered. And that is why it is so important to accumulate good savings throughout life, starting as young as possible.
And the gender gaps that persist in American society, with women living with many disadvantages compared to men, are transferred to retirement settings. According to the Transamerica Center for Retirement Studies, the average women’s retirement savings is 44,000, which may sound like an important number, but let’s analyze what the statistic says.
Is $44,000 a Good Number in Retirement Savings for Women?
According to Fidelity estimates, it is advisable to have the equivalent of your annual salary in retirement savings, such as a retirement account (IRA) or a 401(k), by age 30. So if you have an income of $40,000 at that age, you should have about $40,000 in savings in your retirement account as a good start.
On the other hand, if you are 45 years old and have an annual income of $65,000 a year, but a savings of $45,000, you have work to do to reach a balance. Fidelity also recommends having set aside three times your retirement income by the age of 40.
According to the Pew Research Center in 2022, women in the United States earned only 82% of what men earned in similar jobs. A Goldman Sachs report revealed that over their lifetime, women earn 21% less than men. Despite this wage gap, American women retire on average two years earlier than men.
According to data from the U.S. Census Bureau, in 2016 the average retirement age for women was 63, in contrast to 65 for men. Other sources, such as Forbes, mention that the average retirement age is 65 years for men and 62 years for women as of 2021, indicating that women retire even earlier than men as time progresses.
How Can Women Improve Their Retirement Savings?
To start, if you have a 401(k) retirement plan, make sure you’re getting all of its benefits. Not all retirement plans offer an equivalent contribution from the employer, but according to Vanguard’s analysis, 95% of such plans do. Talk to your employer to determine if all possible contributions are being made to your retirement savings.
It is worth remembering that when your employer contributes funds to your 401(k), it is not only a sum of money that is reserved for your retirement; it is also money that you can invest and make it work for you.
Historically, the stock market has had an average annual return of 10% for the last 50 years. Suppose you are 32 years old and you plan to retire at 67. The funds you invest today will have 35 years to grow. If you receive a $2,000 employer contribution to your 401(k) this year, and your investments in that account generate a 10% annual return until you turn 67, that $2,000 could be worth more than $56,000. In other words, a single contribution of $2,000 could result in a retirement savings balance higher than the current average of retirement savings among women.
