Closing the Retirement Income Gap

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Closing the Retirement Income Gap

In the United States, the “retirement-savings gap”––the difference between what a person believes they need to retire comfortably, and how much they currently hold––is growing fast. But among women, the gap is even wider. 

The concept of the retirement gap refers to the disparity between the amount of money individuals have saved for their retirement and the amount they will actually need to maintain their desired lifestyle during their retirement years. 

Currently, U.S. adults believe $1.46 million is needed to retire comfortably, but the average amount saved for retirement is only $88,400.

This gap can be significant and is influenced by various factors including lifespan, inflation, healthcare costs, and lifestyle choices. 

However, there’s an even more pressing retirement gap appearing in U.S. society, and like many of the other gaps, this retirement gap disproportionately affects women. While dollars and cents may appear indiscriminate on a bottom line, in actual fact retirement outcomes are anything but gender-neutral.

No matter your demographic, understanding the retirement gap is crucial for effective financial planning and helps ensure a secure, comfortable retirement.

Factors Contributing to the Retirement Gap

  • Longevity: As medical advancements improve and lifespans increase, people are spending more years in retirement. This extended period requires more substantial savings.
  • Inflation: The cost of goods and services rises over time. Inflation can erode the purchasing power of your savings, meaning you’ll need more money in the future to maintain the same standard of living.
  • Healthcare Costs: Healthcare expenses tend to increase as people age. Many retirees underestimate these costs, which can significantly impact their savings.
  • Lifestyle Choices: The type of lifestyle you wish to maintain during retirement plays a critical role. Whether you plan to travel extensively, pursue expensive hobbies, or maintain a modest lifestyle, these choices will determine how much you need to save.
  • Inadequate Savings Plans: Many individuals either start saving too late, save too little, or do not invest their savings wisely. Relying solely on social security or pensions can be risky as these may not cover all expenses.

How to Overcome the Retirement Gap

Overcoming the retirement gap requires strategic planning, disciplined saving, and informed investing. Here are several steps to help ensure you have enough savings to live your desired lifestyle in retirement:

  1. Start Early and Save Consistently: The earlier you start saving for retirement, the more time your money has to grow. Utilize compound interest by consistently contributing to your retirement accounts. Even small, regular contributions can help accumulate significantly over time.
  2. Create a Retirement Plan: Outline your retirement goals and calculate how much money you will need. Consider factors like your desired retirement age, expected lifespan, and anticipated lifestyle expenses. You can use online retirement calculators to help you determine your “magic” retirement number.
  3. Maximize Retirement Contributions: Take full advantage of retirement accounts such as 401(k)s, IRAs, and Roth IRAs. Consider contributing the maximum allowable amounts to benefit from tax advantages and employer matching contributions.
  4. Diversify Investments: A well-diversified portfolio can help manage risk and improve returns. Consider spreading your investments across various asset classes, such as stocks, bonds, and real estate, to help mitigate potential losses in any one area.
  5. Regularly Review and Adjust Your Plan: Life circumstances and market conditions change. Regularly review your retirement plan and make necessary adjustments to help you stay on track. Reassess your savings goals, investment performance, and retirement timeline.
  6. Consider Healthcare Costs: Plan for healthcare expenses by exploring options like Health Savings Accounts (HSAs) and long-term care insurance. These can help cover medical expenses and reduce the financial burden during retirement.
  7. Manage Debt: Entering retirement debt-free can help enhance your financial security. Prioritize paying off high-interest debt and avoid accruing new debt as you approach retirement.
  8. Seek Professional Advice: Financial advisors can provide valuable insights and strategies tailored to your specific situation. They can help you navigate complex investment options and optimize your retirement plan.

Closing the Gender Retirement Gap

While men and women generally have similar basic needs for retirement, women face unique personal and professional challenges that can make it harder for them to secure their retirement. Despite improvements in education, employment, and earnings over the years, women still save about 30% less for retirement than men.

Differences in attitudes and perceptions contribute to the gender gap in retirement. While women have similar retirement goals as men, they are less confident about achieving them: 36% of women doubt they can retire comfortably, compared to 21% of men. This lack of confidence, along with lower wages and retirement savings, may be due to less financial education, societal gender expectations, or their own views on their investment skills.

To help close the gap in retirement savings, it’s crucial to learn about money and improve financial literacy. Understanding how and why to save is very important. The earlier you start learning about saving for retirement, the better, regardless of your age. There are many useful tips and resources available to help you start saving or continue growing your savings.

Here’s how you can work to close the gap.

  • Set a Goal: First, define your goals, such as saving for retirement. Use our Financial Calculators to get the ball rolling here.
  • Build Your Portfolio: While thinking about your goals and tolerance for risk. Then, use a portfolio that matches your needs.
  • Follow Through: Bring your portfolio to life with your financial advisor. Instead of worrying about day-to-day market volatility, think about the long game of investing. Investments aren’t about how your money looks today, but what they may grow to years from now.
  • Revisit: You should check in with your portfolio periodically. By continually scheduling check-ups with your advisor, you’ll have the opportunity to adjust savings goals or rebalance your portfolio if needed.

How CKS Summit Group Can Help

CKS Summit Group is experienced in financial, retirement, and investment planning, offering a range of services to help you overcome the retirement gap and achieve your financial goals. Here’s how CKS Summit Group can assist you:

  • Comprehensive Financial Planning

CKS Summit Group takes a holistic approach to financial planning. They evaluate your current financial situation, retirement goals, and risk tolerance to develop a personalized plan. Their advisors help you understand the intricacies of retirement savings, investment options, and tax implications, helping ensure a robust financial strategy.

  • Retirement Planning

Retirement planning at CKS Summit Group goes beyond basic savings advice. They consider all aspects of retirement, including income sources, expected expenses, and potential healthcare costs. By creating a detailed retirement plan, they help you determine how much you need to save and the best strategies to help you achieve your desired retirement lifestyle.

  • Investment Management

Investing wisely is crucial to growing your retirement savings. CKS Summit Group offers investment management services, including portfolio diversification, risk assessment, and performance monitoring. Their team helps ensure your investments align with your retirement goals and risk tolerance, helping maximize potential returns while minimizing risk.

  • Risk Management and Insurance

Protecting your assets and achieving financial stability in retirement involves managing risks effectively. CKS Summit Group provides guidance on various insurance options, including life insurance, long-term care insurance, and more. These products can help safeguard your retirement savings against unexpected expenses and provide a steady income stream.

  • Ongoing Support and Adjustments

Retirement planning is not a one-time event. CKS Summit Group offers ongoing support, regularly reviewing and adjusting your financial plan as needed. They stay ahead of market changes, economic trends, and legislative updates, helping ensure your retirement strategy remains relevant and effective.

  • Educational Resources

CKS Summit Group believes in empowering their clients through education. They offer a wealth of resources, including seminars, webinars, and informative articles, to help you make informed financial decisions. By understanding the principles of financial planning and investment, you can take a more active role in securing your financial future.

Final Thoughts

The retirement gap is a critical issue that can impact your ability to enjoy a comfortable and secure retirement. Unfortunately, this gap is catapulted for women’s retirement planning. Understanding the factors that contribute to this gap and taking proactive steps to overcome it can help ensure that you have enough savings to support your desired lifestyle.

Partnering with advisors like CKS Summit Group can provide the guidance and strategies you need to navigate the complexities of retirement planning, investment management, and risk protection. Their comprehensive services and ongoing support can help you confidently plan for a financially secure future.

Contact us today to get started.