Retire Ready! Tips for Building Retirement Savings after 40
Retirement planning – it’s a topic many of us try to avoid. It’s complex, intimidating, and downright confusing. How do you create a plan when you don’t know how much you’ll need by the time you retire? How can you save enough when you may be living paycheck-to-paycheck?
Fortunately, retirement planning doesn’t have to be a mystery. There are practical steps you can take to ensure you’ll have enough for retirement, even if you’re starting a little later in life.
I interviewed financial coach Latika Tillis to discuss the topic in more detail.
Would you share a bit about your background and experience as a financial coach?
I’ve been in the financial services industry for over 15 years, working with advisor teams serving high-net-worth individuals. I began my career as an associate and am now the Director of Operations at a boutique wealth management firm. I decided to use my knowledge in the finance industry to coach individuals and families to get on the right track to start their wealth-building journey.
What would you say are some common financial misconceptions women have about retirement planning?
Misconception #1: While social security benefits should be considered as part of your plan, it should not be the only source of income you rely on.
Misconception #2: Your 401k may not be enough to cover expenses in retirement. There are other vehicles that can be used to save toward retirement and a sufficient retirement plan will consider these additional tools as well.
Misconception #3: You must drastically cut back your expenses in retirement. If you’ve done sufficient retirement planning you may not have to make drastic changes in your lifestyle. I’ve known some people who have lived a fuller financial life in retirement than they did when they were working full-time.
Misconception #4: Retirement does not mean you have to stop enjoying life! Outside of the financial component of retirement planning, it is important that you ensure a life outside of work and incorporate this into your plan.
What would you say are the biggest challenges women face when saving for retirement? Are there any challenges unique to women of color?
Life expectancy: The life expectancy for women is longer than men, but women have less saved toward retirement than their male counterparts. About half of women between ages 55 and 65 have nothing set aside for retirement.
Gender wage gap: The wage gap between men and women makes women save less than men for retirement even though we live longer. Women of color tend to earn much less than any other group, which impacts how soon or if a woman feels like she is able to save for retirement.
Natural nurturers: Women also tend to be very nurturing and giving and will give money to others at a proportion that can be detrimental to their ability to save for retirement.
Primary caregivers: Women are usually the primary caregiver for children (whether single or married). We find ourselves so concerned about the well-being of our children that we often neglect our personal priorities with saving for retirement being one of them.
To have a comfortable retirement, what should women think about (beyond just saving) when planning for their future?
It is important that you review and manage your expenses. As you approach retirement, you need to understand if the income you are projecting is enough to cover your expenses in retirement. If you find that you will have a decrease in income once you retire, you will need to make adjustments to expenses. Also, understand your Medicare options and the process for enrollment.
What steps can women in their 40s, 50s, and 60s take to increase their retirement contributions, even if they haven't saved much so far?
At a minimum, contribute up to what your company will match in your company retirement plan and take advantage of the free money. If your company matches up to 6% of your contributions and you are only contributing 3% of your salary, do all you can to contribute the 6%.
Work to eliminate any credit card and high interest debt as quickly as possible. What we pay toward consumer debt is taking away from planning for the future.
Consider what skills you have to monetize. Are you a good cook? Pick up a few catering gigs. Are you crafty or good at decorating? Work on a plan to offer your design services for a bit of extra money that you can contribute toward your retirement goals.
What are some budgeting strategies women can use to free up more money for retirement savings?
Make a list of ALL expenses and categorize them: non-negotiable expenses (things that you must pay like mortgage or rent that remain fixed), negotiable expenses (things that are optional but may require a sacrifice to cut them out like cable and subscriptions), and gratuitous expenses which are expenses that can be considered as luxury expenses, like getting your nails done.
If you find that you do not have enough money in your budget to increase saving for retirement, cut out the gratuitous expenses and use that to build your retirement savings. Next, review your negotiable expenses to determine if you are willing to trade some of those to increase retirement savings.
Do you recommend using online retirement planning tools to estimate needs and track progress? If so, what websites do you recommend?
Online tools can be helpful if you are committed to providing accurate data and can keep up with it. Empower (previously Personal Capital) has a great tool to track your finances and help you stay on track with your retirement progress.
Are there any specific strategies for women who are self-employed or have non-traditional work arrangements to save for retirement?
One of the most powerful tools available to a business owner is their ability to grow their business. One strategy for retirement can be to scale your business and sell the business to maximize wealth. This isn’t the easiest thing to do, but it is worth considering.
The more traditional route in planning for retirement for self-employed women is to take advantage of self-employment retirement accounts like the SEP IRA. The SEP IRA allows business owners to contribute the higher of 25% of your overall compensation or $69,000 (2024 limits) toward retirement.
It is very important that entrepreneurs balance reinvesting in their business, managing their personal expenses, and planning for retirement.
What resources would you recommend to women who want to learn more about retirement planning and improve their financial literacy?
Investopedia.com is a great resource. There is a wealth of information on this site. Almost any question you can think of from retirement planning to investing and many other financial topics can be found on this site.
How can women interested in working with you to achieve their retirement goals get in touch with you?
I can be reached via email at info@latikatillis.com or visit my Instagram page @latika_tillis.
Leah Hird is the career and money editor for Hope Magazine. She also freelances as a ghostwriter, specializing in crafting engaging marketing content for women-led businesses. You can follow her on LinkedIn.