Thursday’s step for America Saves Week is saving for retirement. See? I told you we would revisit the topic!
Saving for retirement is important for everyone, but women face unique challenges that often cause financial hardships during retirement. Women are twice as likely as men to be poor in retirement, and as they grow older they grow poorer. Since women live four years longer on average than men and are three times more likely to live alone, not having enough saved for retirement is a significant problem. WISER encourages everyone to start saving for retirement early, but even if you feel a little behind with your savings, it’s never too late to start. Every step you take now can go a long way towards achieving a more financially secure future.
One of the best solutions to increasing your retirement savings is to participate in your company’s 401(K) plans and maximize those benefits. Try to contribute enough to receive the company match. If you are already contributing that much, plan to increase the amount you contribute by 1% in 2014.
For me, a company 401(K) is not currently an option. I work several jobs, but they are all part time so I do not qualify for company retirement plans. This situation is one that many women face. But it does not mean that you can’t open your own retirement account.
Now, I can guess what you’re thinking. I write about retirement issues. How can I not have an account already set up?
The truth is I have a lot of “reasons” to wait. I am only in my early 20s. I’m a graduate student with student loans. After tuition, books, rent, and food, every penny I can save usually goes towards paying interest on my loans so that when I graduate I do not have even more loans to pay. Graduation is right around the corner, and retirement just seemed like something I could get to later.
Working at WISER certainly exposed me to reasons why this attitude could cost me in the long run, which is why I choose “Retirement” as my reason for participating in America Saves Week. Today, I decided enough with the excuses. Setting up a retirement account now does not cost me excessively, while delaying it hurts me in the long run.
Where to start? My first step was to research the different type of retirement accounts. I found this article particularly helpful in explaining the difference between a Tradition and a Roth IRA. After reading that article and a few more, I decided on opening a Roth IRA. One of the main differences between Traditional and Roth is that with a Traditional IRA you contributions are tax deductible (tax free), but your withdrawals are taxed. In a Roth IRA, you pay taxes on your contributions, but withdrawals are tax free. This makes Roth IRAs ideal for someone who can expect to be in a higher tax bracket when she retires. Since I am just starting my career, I know that I will be in a higher tax bracket in forty years.
My next step was to research where to open my account. I am a fan of the breakdown by NerdWallet, but make sure you do your own research. I chose an option that had no fees or minimums, but limited stock trading options. This option works for me since I don’t plan on doing much trading. Once you pick your financial institution, it’s a pretty simple process to open your IRA, but it can be a time consuming. I filled out all of my information online. It took roughly 30-45 minutes but that includes taking extra time to make sure all of the information was correct. And now I have an IRA!
Based on yesterday’s theme, I also set up transfers to my IRA automatically. Because I am still concerned about my student loans, I chose to transfer only once a month. Like WISER says, start small and grow from there.