"Women face a number of challenges when it comes to saving for retirement including gaps in their career when they are not actively contributing to their retirement and longer life expectancies, said Patti Balthazor Björk, director of
Women More Affected by Retirement Leakage
Taking funds out of retirement savings prematurely, or leakage, contributes to women's retirement savings shortfall.
"There is little impact to long-term savings if loans are repaid in full and if individuals continue to contribute to their retirement savings while they repay the loan," explained Björk. "However, the real threat to financial security comes when participants default on loans, most often at job termination. Unpaid loans are subject to taxes and penalties that create a permanent loss from workers' retirement savings."
Helping Women Close the Gap
Invest more and begin investing earlier. Women can significantly increase their final retirement savings balances simply by increasing contributions and/or starting to save earlier.
Take advantage of employer matching contributions. Women who are contributing below their company's match threshold are essentially missing out on free money. Increasing 401(k) contributions to the match level will boost women's long-term savings outlook. As an example, the average woman, receiving a company match level at
Make the most of automatic features. Automatic features, such as automatic contribution escalation, can help women gradually increase the amount they are saving for retirement with minimal effort. However, in many retirement plans, workers must actively choose this option.
Avoid leakage. Leakage from retirement savings is a large threat to women's financial security. While there may be times when women need to turn to withdrawals or loans from retirement savings to cover expenses, they should tap these funds only as a last resort and only for true hardships. Women should avoid taking loans and, when loans are necessary, limit the number of loans they take at any one time to reduce the risk of defaulting.
Take advantage of "help" tools. A report from
Click here to read the report highlights.
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