What’s the number-one mistake women make about their retirement?
I’m Rachel Sanborn, lead financial planner for Ellevest. The biggest mistake I see women make is not getting started.
What to do first
For some of us, that means taking all the steps you can to pay off high-interest consumer debt. Get a side gig, negotiate your big bills and fixed costs down, rethink how much house you need. That’s the first thing.
But I also talk to a lot of women who don’t have that debt — but don’t feel like they don't have enough money left over to save 20% of their income for their future selves, which is what we recommend.
The easiest way to get a jump start is by setting up deposits on autopay — because out of sight, out of mind, and you can start small. If your employer has a program to match some of your 401(k) contributions, start there so you get that free money.
If not, start saving up an emergency fund first. That’s three to six months of your take-home pay, so you have a cushion.
Ramp up that autopay
Next, if you’re in your 20s or 30s, set up that autopay for 5-10% of your gross income, or whatever you can, and then set up plan to automatically increase your contributions by at least 1% per year (if not every six months), until you reach 10-15%.
If you're in your 40s or beyond, and you’re just starting to save for retirement, you might need to get to 20% or more of your income. In many cases, this could be as much as or beyond the maximum you’re allowed to contribute to a 401(k) or 403(b) per year.
The good news is that the IRS lets people over age 50 contribute more to their tax-advantaged retirement accounts: the 401(k)s, 403(b)s, and Individual Retirement Accounts, or IRAs.
So then it becomes thinking about at what age you want to retire, and what other costs you can eliminate to get you to that goal.
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