If you haven’t filed your tax return for the 2018 tax year, you might be able to take advantage of an easy way to grow your retirement savings. But you need to act quickly! You have until April 15, 2019 to make a retirement contribution for 2018 .
You may already have a Roth or Traditional individual retirement account (IRA), or you want to start one, but don’t have any available cash to deposit. Maybe you will get around to it next year. So why do you need to rush and focus on this?
Because, as a woman, there is a good chance you may not save enough for retirement and will literally run out of money before you die. You can see I’m not going to sugar-coat this.
According to Transamerica, the median retirement savings balance among working women is just $34,000. That means that half the women in the study had more than $34,000 saved and half had less. If you are in your 40’s or 50’s, and $34,000 is all you have saved for retirement, you must focus on boosting your retirement contributions every year otherwise there is a very high probability you will run out of money.
Think about it: how many years will $34,000 last you when you are no longer earning income? Think social security will cover your needs? Ha! Go ahead and log onto www.ssa.gov to check what you might receive in monthly social security benefits if you start collecting at age 62. I don’t know anyone who has been pleasantly surprised by this number. (If you are divorced and were married for at least 10 years, you can either collect your full social security benefit or half of your ex-spouse’s benefit.)
I recommend an easy way to help mitigate this problem. If you are separated or divorced, you may have $2,000 (or possibly even more) sitting in your drawer or jewelry box. It’s the most sparkling financial asset you own and it could be used to boost your retirement savings.
In its Building a Financial Fresh Start Study, Worthy found that 64% of divorced or divorcing women surveyed did not think of their diamond engagement ring as a financial asset. You might have never thought about this but the ring you no longer wear can be sold and the proceeds used to invest for your future. After reaching a certain age, a woman can withdraw money each month from a retirement account to help pay for living expenses. She can do this until the money runs out.
For example, if you were to generate a lump sum of $2,000 by selling your ring with Worthy that could become seed money for an IRA. If you were able to earn extra income of $400 per month through a side gig and transfer the money each month into an IRA, after 25 years your retirement savings would be worth close to $300,000 assuming a 6% annual rate of return. $300,000 can keep you going for many years, assuming your living expenses are modest.
Even if you make just a one-time contribution to an IRA, that money could grow significantly over 30 years. For example, if you were able to invest $5,000 in a fairly conservative mix of stocks and bonds that generated an average annual return of 5%, in 30 years that account could be worth more than $22,000. So even if you are unsure whether or not you can add to your account each year, it is worth doing even just once.
Like the idea of investing in an IRA but not sure how to get started? See if there is a financial advisor in your community who is willing to charge by the hour to help you. If you can’t find one, you can sign up for my “financial empowerment” package which includes two one-hour one-on-one sessions for $399. Using video conferencing and screen-sharing, I will help you open up the type of IRA that is best for your situation and educate you on how to invest your money in low-fee exchange-traded funds or individual stocks. To learn more about investing in simple-to-understand language, check out my three-part Investing 101 blog post.
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