These strategies can help women achieve their retirement goals

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Women tend to live longer than men, therefore it stands to reason that they need to put away more money for life after work. According to the National Center for Health Statistics, the average life span for a female born in 2018 will be 81.2 years. For a woman who was 65 in 2018, an average of nearly 20 more years is expected. By contrast, the average life expectancy for a 65-year-old man is another 18 years.

While there is no crystal ball to tell when your final day will come, a review of your family life history can provide greater awareness and improve your ability to plan for adequate income replacement.

Women can utilize their additional time horizon to leverage the power of compounding — the ability to grow investments by generating a greater return on an asset’s earnings. Compounding requires two elements to work: re-investment of earnings and time.

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Statistically speaking, women already have time on their side; the variable needed is investing as early as possible to allow initial investments and all of its earnings to grow exponentially. If at least part of a retirement portfolio is in a tax-advantaged 401(k) or a Roth IRA, tax savings could add current and future benefits.

Despite the advances that women are making in the boardroom, at home, and in their communities, a woman’s lifetime earning power is still below that of a man. A study by the National Women’s Law Center found that a woman working full-time stands to lose $417,400 over a 40-year career, when compared to a male.

As progress toward pay equality continues, women can find value in putting investable dollars to work and building a nest egg. To help level the playing field, women can leverage tools like dollar-cost averaging — the simple process of faithfully investing a fixed dollar amount into a mutual fund or another investment instrument at predetermined intervals. Even though the amount of money invested remains the same, the number of shares purchased varies based on the market value of the shares at the time of purchase. When markets are up, you are buying fewer shares per dollar invested due to the higher cost per share. When markets are down, it is reversed to more shares per dollar invested.

Dollar-cost averaging requires discipline, providing investors with the opportunity to attain an average cost per share over time. If saving becomes a lifelong habit, you won’t have to spend time and effort monitoring market movements and trying to strategically time investments.

Embracing diversification (and sticking with it) is another key to success. By allocating funds among various financial instruments, industries, and other categories, diversification can reduce the risk in a portfolio. It aims to increase return by investing in areas that would each react differently to the same event. Although diversification does not guarantee against loss, it is an important step toward reaching long-range financial goals while lowering risk.

Melissa Nunez

Speaking of risk, a recent study by Blackrock found that 41% of women haven’t started saving for retirement and tend to not see themselves as investors. Women are acquiring more wealth than ever before and are set to inherit the majority of $30 trillion in intergenerational wealth. Now is the time for women to examine and reverse their fears of investing.

While relevant to both female and male investors, there are a number of other issues that should be addressed. Many are related to marriage, children, whether you are a one- or two-income family, whether each spouse is helping to fund the retirement of the other, and what might happen if the marriage were to end. It’s wise to consult a financial planner and legal advisor to get answers to these questions.

For more information on retirement planning, contact Melissa Nunez at melissa.nunez@CLAconnect.com or 505-222-3594. For more information about CliftonLarsonAllen LLP, visit CLAconnect.com.

This article originally appeared on The Patriot Ledger: Investment strategies to help women reach retirement goals