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Single Moms Headed for Big Trouble in Retirement


Single moms with college bound kids are in a constant struggle to make ends meet.  If they happen to have any money at all left over at the end of the month, it has to go into their already too-meager college savings account.

What about your retirement savings?

The usual answer I get to this question is that retirement savings will have to wait until the kids have graduated from college.

 But what about your 401K savings account?

There is one incredible savings opportunity that allows for no excuses—no matter what your circumstances. That is the employer’s match to your 401K.

Do you really want to turn down that money?

Research shows that a full 28% of women are not contributing an amount equal to their employer match. By not taking advantage of it, however, they are literally throwing money away each and every month.  What’s worse, they are missing the time value of that money and are risking big trouble when it comes time to retire.

It’s too small an amount of money to worry about, you say?

Let’s start with a small amount of money and see where it takes us in a period of 20 years.  Say your employer is offering to match up to $250 per month to your savings.  To take advantage of the match, you reluctantly agree to tighten your belt even more and accept a $250 reduction in your monthly pay.  Here’s the first bit of good news.  Your $250 contribution was pre-tax money and will actually only reduce your monthly paycheck by about $180-$190 ($90 to $95 per pay period) depending on your tax bracket.  Not a bad deal– thanks to Uncle Sam.

Impact on your retirement savings

Over the last 20 years, the market has returned an annualized 8.5% return to investors.  Let’s assume that the market delivers the same rate of return over the next 20 years—about the time you want to retire.  What will that $180 to $190 per month grow into with your employer’s match.  Your total amount saved in 20 years comes to $345,508.83!  You got it.  That’s a whole lot of money.

So What’s the Problem?

Even though more single woman than men run out of money at retirement, woman tend to worry a lot less than men about it.  According to a survey done by Ameriprise Financial Services, woman shouldn’t be feeling as good as they do.  Women also underestimate the number of years they will be in retirement according to the survey.  Finally, woman have a well documented aversion to risk and somehow feel less confident about seeing their money go into the market.  They often use this as an excuse for not contributing to their 401K.

Let’s Analyze the Risk

Too much risk you say?  Even if the funds within your 401K went down 30% you would still be 20% ahead.  That’s because half of the money came from your employer’s pocket—not yours.  I don’t know about you but I’ll take that kind of risk anytime!

Mary Small has over 18 years in recruiting and management with Louis Knox Financial and Sequoia Financial Network, with nearly a decade focused on financial advisor recruitment and retention. At Louis Knox she also managed the day-to-day tactical and long-term strategic activities within the business. As a mother of two college students, she understands the financial stress that parents of college-bound children are experiencing and can help create financial solutions that will work for them. Mary lives in Bloomingdale, IL with her husband Jon and their two children. She enjoys spending time with her family, coaching, yoga and physical fitness, especially in conjunction with supporting a cause like the 3-day breast cancer walk.

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