It’s no secret that female leaders face more challenges when saving for retirement, for many reasons—including the gender pay gap. As revealed in our 2019 Retirement Gap report, 20% of women who support dependents are not saving for retirement at all. The women in our study mentioned both financial and time management struggles of providing for dependents, a discussion not even considered by our male respondents. Being carers to dependents, women may need to spend more time away from work and miss out on promotion opportunities, resulting in less money available to contribute to their retirement.
Additionally, women also live longer than men by about six to eight years on average according to the World Health Organization, and they’re subject to higher healthcare costs. An analysis conducted by Fidelity Investments shows that female retirees aged 65 are likely to pay around $150,000 in healthcare costs throughout their retirement; while male healthcare costs come up to around a significantly lower $135,000.
We believe that women should be empowered to prepare for retirement, and we’ve rounded up some tips for you:
Start shifting responsibilities and start side activities
Your effectiveness as a leader isn’t just obvious while you’re in the top position. In fact, it becomes highlighted as you shift responsibilities seamlessly to the next generation of management. Once your core responsibilities have been designated, you get more time to cultivate other ideas and activities that you can invest in while retired. Retired president and CEO of Aureus Asset Management Karen Firestone shares how she spends her retirement days, saying “I began to write articles … eventually writing a book on sensible risk taking in business, investing, and life. The book led to speaking engagements, more writing assignments, appearances on television, and a couple of years ago, a contract with a major financial network, on which I appear a few times a month.” Many retirees feel a sense of purposelessness when they start letting go of responsibilities, but you can use this newly freed-up time to your advantage.
Consider cash balance plans at the peak of business
When your business is doing well, you should consider funding a full retirement plan, particularly a cash balance plan. There are several retirement savings vehicles available, but a cash balance plan’s contribution limit increases with age. This means that older owners are able to double or even triple their pre-tax contributions.
Unlike the more popular 401(k) plan which has an annual contribution limit of $19,500 in 2021, a Cash Balance plan allows you to invest more money into your future. For this reason alone, a cash balance plan could prove more beneficial to you, especially when you hit the peak of business and earnings. This will allow you to secure a percentage of your business’ cash for when you retire.
Restructure your company
Your departure from your business will definitely bring changes in the power dynamics of your team and may require structural changes. Such adjustments often necessitate legal reorientation as well, so you may want to look into your business’ legal structure and determine if it can continue to hold up the company.
For those who own a sole proprietorship or partnership, moving on can be a good time to upgrade in order to give the company more legal protection under the new owners. The next step up from those structures is a limited liability company. For those working in Seattle, forming an LLC in Washington gives them a number of advantages when it comes to management structure flexibility and liability. This will allow both for a smooth transition, as well as further protecting the business from any legal or financial trouble. LLCs in New Hampshire, on the other hand, have been subject to veil-piercing claims since 1933, and several other state courts may still hold you and your successors personally liable for your business if it remains unincorporated. You don’t want to be dragged back into business troubles in your retirement. It’s best to check with your state for the best company structure options, since rules on LLC formation vary from each state.
From employment to retirement, women have to play by more stringent and sometimes disparaging rules. But these have only brought out women’s propensity to strive for success and secure a comfortable retirement for themselves. Reach out to us and book our Retirement Savings & Tax Reduction Solutions, so we can get you moving toward your dream retirement.
For more tips and information regarding retirement plans, contact us.
