A Surprise About Gender And Saving Money

By: Kelly Wallace
Topics: Field Notes

(CBS)

Kelly Wallace is a CBS News Correspondent based in New York.

I wouldn't say I was surprised to learn that according to a recent report, women are less prepared than men for retirement. We know women live longer than men (about three years on average), that women still don't make as much as men and that women – more than men – are moving in and out of the workforce to take care of children.

But what was surprising is that women start saving later – two to four years later than men – even when the wage gap between men and women after high school and college is not as dramatic as it is in later years. Women of America – this is a big mistake. Just consider the numbers.

If you were to invest $1,000 a year (that's just $20 a week) from age 25 to 35, you could turn your $10,000 investment into $168,000 by the time you are 65. But if you wait until you're 35 and save $1,000 a year from 35 to 65, you'd likely end up with $125,000 – $43,000 less than what you would have had if you started saving earlier.

I can preach because I made the mistake myself. In my 20's, it took me a few years before I started investing in my company's 401(k). I could barely afford to pay the bills. How could I put away much for retirement? Then, after I got my first job as a reporter and had to take a 50 percent pay cut, I cashed out my 401(k) which meant paying nearly 40 percent in taxes and penalties on the few thousand dollars I had saved. Not a smart move. Had I only started regularly saving for retirement in my 20's and never cashing out, I'd be in better shape for retirement. But thankfully for myself and for any of you reading this blog and worrying about your golden years, it's never too late to start saving.

Consider the case of one of the amazing women you'll meet in tonight's story on The CBS Evening News with Katie Couric. Michelle Sullivan loved to shop, so much that she accumulated 40 credit cards – that's right 40 cards – and found herself with $30,000 in credit card debt. The 48-year-old mother of four didn't think about retirement until three years ago, when she and her husband divorced. Suddenly, she had to think about supporting herself, taking care of four children and saving for retirement.

Sullivan started attending workshops titled "Smart Women and Money" sponsored by a group called Women's Voices of Georgia. (http://mvgeorgia.org/programs/smart-women-money/) Vickie Elisa is the group's president. "We know that 65 percent of the women in the U.S. who are over the age of 65 face some severe challenges when it comes to retirement," she said. "Many live in poverty. And it's because of decisions that were made when they were young or information they didn't have."

After attending Elisa's workshops, Sullivan learned to cut back on the little things, such as getting her nails done and eating out, make a monthly budget and consolidate her credit card debt at a lower interest rate. In two years, she paid off nearly all of that $30,000 credit card debt, bought a home and opened up a retirement account.

"I educated myself," Sullivan said. "That's the most important thing to get education and that's what got me my home, that's what got me my car, I learned how to save.

Besides starting early, there are plenty of things you can do to make sure you are as prepared as men for your golden years. Beth Kobliner, author of the book, "Get a Financial Life," passed along some great tips which we included below. Also, check out the Women's Institute for a Secure Retirement site which is chock full of practical advice.

So start saving. You will be grateful you did when you retire.

Tips from Beth Kobliner, author of "Get A Financial Life:"

Meet your match. Contribute at least enough to your 401(k) to meet your employer's match. Many companies will match up to 6 percent of your contribution, offering, on average, 50 cents for every $1 you put in. That's a great deal.

Go with a Roth. Once you reach your company's matching limit, consider opening a Roth IRA. As long as you make under $101,000 as a single person or $159,000 as part of a married couple, you can put away $5,000 a year ($6,000 if you are 50 years old or older). If you make more, you might still be able to save at least some money in a Roth.

Max out your 401(k). If you have the cash, do this.

Catch up. The rules say you can contribute an extra $1,000 a year to an IRA once you turn 50, or an extra $5,000 a year in your 401(k).

Start early.

Don't cash out. Although 45% of people trade their 401(k) balances for cash when they change jobs, this is one of the worst things you can do. You want to keep that money where it can grow free from taxes—remember, if you cash out before retirement, you have to pay taxes and a 10% penalty.

Look into the "Saver's Credit." If your household income is under $53,000, every dollar you contribute to an IRA or other retirement account (up to a total contribution of $1,000 per person) may qualify for a rebate of up to 50 cents when you file your taxes.

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by earln7 January 7, 2011 7:54 AM EST: Many people are surprised to hear that the vast majority of calico cats ... Coat color in cats is a sex-linked trait, a physical characteristic (coat color) related to gender. ... From Wikipedia. Photo: Paula the Calico Cat by GenGlo on Flickr ... From do-it-yourself money savers to show-stopping splurges.
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<a href="http://www.mywaysaving.com">Money Savings</a>; Reply to this comment


by vsame January 6, 2011 2:52 PM EST: You should'nt just accept second rate accounts. You could stick with the same accounts because you have had it for a while. But you need to be careful if you do this. Banks and building societies are quick to promote their new best savings accounts . When they offer new savings accounts the more established rates tend to suffer.
<a href="http://www.savingsinterest.net">money savings</a>; Reply to this comment


by vsame January 6, 2011 2:50 PM EST: This means that you should never assume that your high savings rates will stay the best, Make sure that when the rates start to drop that you contact your bank for the best accounts Make sure you do this fast so you dont lose out on interest.<a href="http://www.savingsinterest.net">money savings</a>; Reply to this comment


by dmts9 July 20, 2008 1:41 PM EDT: Are you classifying Michelle Sullivan as a female victim and implying that her husband did not assist in supporting the children? At the age of 48 with 4 children I would believe that the subject of her lack of self discipline and her uncontrollable spending came up more than once during her married time. Also at the age of 48 I find it interesting that suddenly is used when stating that she starts thinking about supporting herself. Don%u2019t you think that more consideration should be given to the financial well being of the family when having children and plans should be made on how they can work together so she can continue to work without interruption? Also there are ways to protect you retirement if you do become unemployed. So at what point do you believe women start taking responsibility for their own well being?; Reply to this comment