Women’s Retirement Challenges: Solutions For Both Entrepreneurs & The Self-Employed
Retirement planning is crucial for everyone, but women, especially those who are self-employed or entrepreneurs, face unique challenges that require special attention. Factors like longer life expectancy, higher healthcare costs, lack of access to employer-sponsored retirement plans, and the gender pay gap make it harder for women to build the retirement nest egg needed to live comfortably in their later years.
Addressing these issues head-on is essential for securing financial independence and stability in retirement. Are you prepared to tackle these challenges and secure the retirement you deserve?
Let’s dive deeper into the challenges women face in retirement and explore practical solutions to overcome these financial hurdles, with a focus on self-employed women and entrepreneurs.
1. Longer Life Expentancy
On average, women tend to live several years longer than men, meaning they need their retirement savings to last longer. This additional time increases the total amount of savings required to maintain a comfortable lifestyle, especially as living expenses and healthcare costs continue to rise with age.'
Solution:
- Start Saving Early and Consistently: For entrepreneurs and self-employed women, the burden of retirement savings falls entirely on their shoulders. Without an employer’s 401(k) match, it’s vital to set up retirement accounts such as a SEP IRA (Simplified Employee Pension) or a Solo 401(k) as early as possible. These accounts offer higher contribution limits than traditional IRAs, allowing entrepreneurs to save more aggressively.
- Consider Longevity When Planning: Self-employed women should plan for a retirement that lasts 20-30 years, or even longer. This means targeting higher savings goals and opting for investment strategies that provide growth over the long term. It’s also important to revisit the retirement plan regularly, especially during years of fluctuating income.
2. Higher Healthcare Costs
Women often face higher healthcare costs in retirement due to longer life expectancy and the potential need for long-term care. For entrepreneurs, this challenge is compounded by the lack of employer-sponsored health insurance, making it even more important to plan for healthcare expenses early.
Solution:
- Factor Healthcare Costs Into Your Budget: Entrepreneurs must account for healthcare expenses that may not be fully covered by Medicare or private insurance. This includes premiums, out-of-pocket costs, and long-term care. Planning ahead by contributing to a Health Savings Account (HSA), if eligible, can help build a cushion for these costs.
- Explore Private Health Insurance Options: Self-employed women should research affordable health insurance options, including marketplace plans and business association health plans, to ensure continuous coverage. The earlier you plan, the more prepared you’ll be for rising healthcare costs in retirement.
3. No Access to Employer-Sponsored Retirement Plans
One of the biggest savings challenges for women entrepreneurs is the lack of access to employer-sponsored retirement plans, such as 401(k)s. Without automatic payroll deductions and employer matches, saving for retirement can be more difficult and often less consistent.
Solution:
- Establish Your Own Retirement Accounts: Self-employed women can take advantage of retirement accounts specifically designed for business owners. SEP IRAs, Solo 401(k)s, and SIMPLE IRAs offer high contribution limits and flexible savings options. Prioritizing these accounts and making regular contributions, even during fluctuating income years,will help build retirement savings over time.
- Automate Savings: Without an employer to handle automatic deductions, self-employed women should set up automatic transfers to their retirement accounts to ensure consistency. Automating contributions based on monthly or quarterly earnings can make saving feel less burdensome and more routine.
4. Inconsistent & Irregular Income Over Time
Women often have inconsistent and irregular income when they work for themselves over the span of their lifetime. For entrepreneurs, fluctuating or irregular income can make consistent retirement savings even more challenging when you don't know when your next payday is from a client. Without the stability of a regular paycheck, like you would at a regular 9-to-5 job, it’s easy for retirement planning to fall by the wayside during leaner months.
Solution:
- Maximize Contributions in High-Income Years: In years where income is higher, self-employed women should aim to contribute the maximum allowable amount to retirement accounts. This strategy can help offset leaner years where savings contributions might be lower.
- Build a Flexible Budget: Entrepreneurs can create a budget that adjusts with fluctuating income. Prioritize savings and investments during high-income months while setting aside reserves for low-income periods to avoid dipping into retirement savings during tough times.
5. Inflation and Rising Living Costs
Women may receive lower Social Security benefits due to lower lifetime earnings and career breaks for caregiving. For entrepreneurs, Social Security benefits might be lower if contributions are based on a lower reported income or inconsistent contributions over time.
Solution:
- Maximize Contributions in High-Income Years: In years where income is higher, self-employed women should aim to contribute the maximum allowable amount to retirement accounts. This strategy can help offset leaner years where savings contributions might be lower.
- Build a Flexible Budget: Entrepreneurs can create a budget that adjusts with fluctuating income. Prioritize savings and investments during high-income months while setting aside reserves for low-income periods to avoid dipping into retirement savings during tough times.
6. Social Security Benefits
Women may receive lower Social Security benefits due to lower lifetime earnings and career breaks for caregiving. For entrepreneurs, Social Security benefits might be lower if contributions are based on a lower reported income or inconsistent contributions over time.
Solution:
- Maximize Social Security Contributions: For self-employed women, Social Security taxes are paid through self-employment taxes. Often, income from earnings reported is lower due to deductible expenses. If you plan on collecting Social Security benefits later in life, keep in mind higher reported earnings over time will lead to higher benefits in retirement.
- Delay Benefits for Larger Payments: If possible, delay claiming Social Security benefits until full retirement age or beyond. Waiting until age 70 increases your monthly benefits, providing more financial security over the long term. This strategy can be especially valuable for women expecting a longer retirement.
Proactive Planning
Women, particularly entrepreneurs and those who don’t have access to traditional employer benefits, face distinct retirement challenges. However, with careful planning and strategic financial decisions, these obstacles can be overcome. By prioritizing early and consistent savings, setting up tax-advantaged retirement accounts, investing for long-term growth, and preparing for healthcare costs, women entrepreneurs can take control of their financial futures.
It’s never too early—or too late—to start taking proactive steps to secure your retirement. Educate yourself, speak with retirement planners, leverage the right retirement tools, and make informed decisions to ensure a comfortable and financially independent retirement.
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LORI WILSON
YOUR MONEY COACH
For over 18 years, I immersed myself in the world of financial services as an advisor, mastering a broad spectrum of areas from insurance (i.e., life, disability, long-term care, health) to investments and comprehensive financial planning. Today, I'm dedicated to helping my clients improve their financial literacy, as too many people are so unprepared — not just for retirement, but for managing their day-to-day finances. This has to change. The ever lurking problem is that money does bring up both anxiety and fear, not just because people lack capability or the ability to grasp or understand money, but because financial literacy was NEVER TAUGHT to them, either by their parents, society, in school or a combination of those three.
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As a MONEY COACH, LORI WILSON is dedicated to helping you improve your financial literacy, as too many people are so unprepared, not just for retirement, but for managing their day-to-day finances. Lori's mission is to provide the financial knowledge her clients need to make clear, confident, and informed decisions about money. When you're ready to start your journey to financial mastery, you can call upon Lori to help.
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