April Daniels Hussar, SELF magazine
With summer fun, beaches and pedicures to think about, saving for retirement is probably the last thing on your mind. Winter seems far away, let alone your 65th birthday, right? But no matter how young you are, it's never too soon to start planning ahead.
According to the Employee Benefit Research Institute's 2012 Retirement Confidence Survey, only 26 percent of workers are now "very confident" that they will have enough money to pay for basic expenses during retirement, and a recent ING study found that women -- especially those who are single, divorced, widowed or raising children -- are alarmingly less prepared for retirement than men.
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Avani Ramnani, certified financial planner and Director of Financial Planning at Francis Financial, Inc. in NYC, tells HealthySELF that most young women are not thinking about retirement, but they should be. "A recent study by Oppenheimer Funds and Third Millennium found that half of single women aged 21 to 34 believe that at this time of their lives, money is for spending, not saving," she says. "Additionally, young single women are more likely to accumulate 30 pairs of shoes than to invest."
Sound familiar? Consider this: Ramnani says if you invested 30 pairs of shoes worth $100 ($3,000 at 7 percent), in 31 years you'd have $24,435 (without accounting for capital gains taxes). "Twenty-four thousand dollars is quite a bit of money," she points out, "especially for those people who say they can't invest because they live paycheck-to-paycheck!"
Here are six reasons why you should start thinking about retirement -- no matter how much, or little you make right now (or how many pairs of shoes you have in your closet!):
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1. Statistically speaking, you probably won't work full-time between now and your retirement day. According to the U.S. Department of Labor (USDL), "Working women are more likely than men to interrupt their careers to take care of family members. Therefore, they work fewer years and contribute less toward their retirement, resulting in lower lifetime savings." Ramnani concurs: "Women spend 11 and a half years out of the workforce, versus 16 months for men," she says. "The bottom line is that women are still far more likely than men to end up impoverished when they're old."
2. Even small amounts can earn interest and add up over time. "Consider this," says Ramnani, "If Jill saves $2,000 a year from age 25 to age 30 -- so for only for five years -- and then stops saving while her money earns 10 percent per year, she will have $377,450 at age 65. This is the power of compound interest."
3. You're going to live a long life! According to the USDL, a woman retiring at age 65 can expect to live another 19 years, which is three years longer than a man retiring at the same age. "Women's long-term financial needs are different from men's because on average they earn 25 percent less and outlive men by five to seven years," says Ramnani. "Because women live longer, they need considerably more in retirement savings than men." Furthermore, she says, women on average save just 44 cents for every dollar that men have saved in pension or individual retirement accounts. "That's an improvement from roughly a decade ago, when women had socked away only 40 cents for every dollar that men had," she says. "But it's still likely to be far shy of what you need."
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4. Marriage is no safety net. It's a bit grim, but up to 50 percent of marriages end in divorce and, Ramnani says, typically, the wife's lifestyle drops while the husband's improves. "Even if you married the 'right' man," says Amnani, "three of four married women become widows by age 75, and -- even more shocking -- the average age of widowhood is 56."
5. Waiting too long can make it harder to start. "Retirement always seems so far away until it is actually staring in your face," says Ramnani. "People start worrying about it when they are between five and 10 years away from it." The problem, she says, is by that stage in your life, although you might be earning more than you ever have before, your expenses are also likely to be at their highest point -- "big house, children's education and a lifestyle that you have built over the past years."
6. Flexibility and freedom to run your life on your terms. "If you are not dependent on someone else to provide for you, it's a lot easier to be able to do what you want to do," says Ramnani. "You could start your own business, scale back and spend more time with loved ones, dedicate yourself to a cause dear to your heart and so many other wonderful things you might want to accomplish."
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