Millennial Women: Will You Be Ready to Retire?

Co-authored with Joanna Ain

While history can be interesting to learn about, it's more important to learn from. So how can millennial women learn from previous generations? Just one hundred years ago, women were forced to rely on the men in their lives for their income, savings and end-of-life care. In fact, until the turn of the 19th century, it was illegal for women to even hold assets in their own names. Today, most women have the autonomy and ability to take charge of our finances, but we don't all do it. We hear repeatedly about investing for retirement, but statistics indicate that few of us are actually deliberately planning for our futures. As millennial women, we have a personal responsibility to protect ourselves and can't afford to ignore that retirement is a part of our life cycle. This week is National Retirement Planning Week, so let's take this opportunity to answer the question, "Will I be ready for retirement?"

Millennial women have many advantages over previous generations of women. For example, a higher percentage of millennial women have bachelor's degrees compared to our male counterparts. The wage gap, while still present, is narrowing. In 1980, women made just $0.64 for every dollar a man earned; 30 years later, women are earning $0.84 for every dollar.

Unfortunately, while we are making gains in the areas of education and employment, we're still not hitting the mark in retirement savings. Millennial women have half as much in our 401(k) accounts as men. And only half of millennial women have started to save at all for retirement, while 61% of our male counterparts have already begun. Overall, in terms of wealth, women only have 36% of the assets that men do.

It's a steeper climb for millennial women of color, who have even less of a cushion for financial emergencies.The gender wage gap is starker for women of color. They are more likely to be starting off without the financial support of their families and many have additional pressures to support family members themselves. This means that starting to think about retirement may be delayed. They are also less likely to get married, which decreases financial safety nets that come due to the benefits of dual income.

It's not uncommon to hear, "save for tomorrow and plan for retirement." This concept is easy to understand but difficult to put into practice. Investing in our workplace 401(k) plans and opening IRA accounts seem out of reach for many when the cost of living has simply not kept up with salaries. And others are opting for expensive lifestyles today, instead of prioritizing retirement planning for the future.

For some, saving for retirement may feel like an unaffordable luxury, but millennial women have no choice but to begin. Women spend an average of 12 fewer years working than men, so we can anticipate smaller Social Security payments. On the other hand, women outlive men by almost five years on average, which means we have a higher likelihood of needing medical care and long-term care assistance as we grow older -- both very costly expenses during the retirement years. For these reasons and many others, women cannot afford to be asleep at the wheel when it comes to retirement planning.

The challenges of saving for retirement are real -- but not saving early can be even more costly in the long run, due to the power of compound interest, which Albert Einstein is reported to have called "the most powerful force in the universe." Here's what it means in dollars and cents: if you can afford to invest $5,000 per year (that's $416 per month, $104 per week or $15 per day) consistently from age 25 to age 65, you will have approximately $1,142,811 at retirement age. Depending on your desired lifestyle during retirement, you may very well need more than this amount, but it is a starting point.

If today's young women hope to enjoy a secure retirement, we need to start saving -- but other actions are needed, too. It's important to keep in mind that women didn't just happen to fall behind men in terms of wealth; rather, strong social and political forces have put barriers to women's wealth building. Until very recently, federal policies have been shaped overwhelmingly by white men with very different life experiences from most American women. For example, taking care of children and parents, work that's largely done by women, does not count towards working history when applying to Social Security. Neither does part-time work that women often perform during these caretaking periods.

Women must fight to make Social Security work better for all of us. More support can be focused towards older Americans (age 80 and up) so that it's targeted towards women when they need assistance the most. Let's educate ourselves and other women about savings options, such as myRA, and push ourselves to start thinking about retirement in our first working years.

Women have historically relied on systems and families to take care of us as we grow old. But those dynamics are changing, so we must take control and put structures in place to ensure our financial security. So the question remains... will you be ready?

Here's one place to start.

Joanna Ain is a Senior Policy Manager @CFED, follow her on Twitter @joannaaliseain