Pensions are past. Gen X-ers will also need to rely more on investment acumen than Americans in earlier generations, the IRI suggests. According to the Employee Benefit Research Institute (EBRI), only 15 percent of today's workers are covered by a defined benefit plan. Additionally, IRI research shows that 56 percent of Gen X-ers expect their 401(k) plans to provide a major source of retirement income, thereby requiring investment expertise to make the plan's value stretch over more than two decades of retirement. Special attention must also be paid to Gen X-ers who are not married and those considered "middle-income" to address their financial needs for retirement. These groups tend to have less money saved for retirement, and are the most likely to have used their savings for present needs, the IRI says.
Although it's a common assumption that women lag men when it comes to planning for retirement, women actually seem to be doing all the right things in retirement saving and investing, says Amy Cribbs, principal with Vanguard Participant Experience, the firm's institutional investment advisory arm.
When eligible, women are slightly more likely than men to join their company's retirement plan, and much more likely to join at certain income brackets. Women's average deferral rates are higher than men's in every income bracket, but especially in the higher brackets. Their average asset allocation is very similar to that of men. And, on average, they don't take any more loans than men do, Vanguard data show.
Cribbs advises retirement plan administrators to court women with automatic enrollment, automatic deferral increases, and a balanced default fund to build early confidence in their investing abilities.
Despite all this, women as a whole have far fewer retirement dollars. The fact that women also tend to live longer than men further compounds the challenge—lower savings means many women must do more with less over a longer time span. Women also remain more likely to be single parents.
On an individual basis, there's plenty that women can do now to set themselves up for a more comfortable retirement, even on par with their male contemporaries.
Should women invest more aggressively? Not necessarily. A balanced approach typically fits both sexes. A longer average female lifespan may make products like target-date funds, which change their risk balance over time, appealing to some investors. But women tend to be more conservative investors when it comes to stocks and bonds overall than men, research shows. That means women may not be aggressive enough early on, when investors can typically ride out market swings.
It's okay to think of yourself first. At least when it comes to retirement savings. College savings is important, of course. But there are options like financial aid and scholarships, plus specifically designed tax-free 529 savings plans. Consider that you're not necessarily being a good parent if you exhaust your assets and have to hit up your adult children for assistance. No one is suggesting that women deny children a comfortable lifestyle, but mothers tend to turn any windfall into family money. Instead, women might think about rolling over bonuses or pay increases into their own retirement savings; automatic deposits may be the way to go.
Your biggest asset is…you. One of the biggest assets young professional women (men too, of course) have in their favor is the fact that they have several more years of income potential. Work-life balance is a constant juggle, but thinking about ways to keep pace with earnings increases (continuing education, consulting on a part-time basis to stay fresh if you step out of the workforce) is a vital part of planning. Disability insurance may make sense should you unexpectedly exit the workforce.