Moms need a retirement plan, too

The data highlights an important truth: Women generally live longer than men. This means women need to prepare for their financial future and conserve their savings for a longer amount of time. And yet, there is a 30% gender gap in retirement savings—meaning for every dollar saved by men, women save 70 cents. Despite the need to make their money last longer, women typically start with less money saved in their retirement fund. The bottom line: Women, specifically hard-working mothers, are being left behind. But moms need to plan for retirement too.

Retirement savings is something we don’t talk about enough—but we should, especially in early motherhood. Research shows women feel less confident about finances, which is why I teamed up with TIAA to surface new data about retirement income for moms. While there are many drivers behind the gender retirement gap, ranging from women receiving lower earnings than men to differences in expectations about payment for childcare, there are easy and accessible ways to get the retirement income you deserve.

Retirement planning for moms often falls low on the list

Immediate costs tend to take priority in our lives. Nearly half of the women surveyed put a lot of thought into childcare costs when thinking about going back to work, while only 33% consider the impact on their retirement.

But leaving the workforce when children are young does not only result in a loss of income, it also means a loss of retirement savings and potentially lowers earning potential later, even if you do eventually return to the workforce. That doesn’t necessarily mean it isn’t the right choice for your family, but if the decision is purely financial, there is more to factor than just immediate income loss.

Early parenthood is often a crucial time for thinking about retirement savings, because the earlier savings happen, the more compounding interest can work in your favor.

Consider a 30-year-old making $60,000 a year who manages to save just 3% of their income, or $1,800 a year. Taking two years off of work at this stage results in over $38,000 less in retirement savings by age 65 when compounded with 7% interest. If that same person took five years off of work, the difference in savings would be nearly $100,000.

More than half of women (54%) say they would keep their current job instead of starting a new job with a higher salary that required higher childcare costs. But consider this: A woman making $60,000 a year and saving 3% of her income is offered a new job, paying $65,000 a year. The new job would require her to spend all of her additional take-home pay on childcare for the next three years. Prioritizing childcare costs might make this seem like a mistake from a financial perspective.

However, in the long run, it gets her ahead. In those first years, at her 3% savings rate, she’ll increase her eventual retirement savings by $4,800, to say nothing of the added long-term salary numbers.

Ignoring these longer-term considerations can lead families to make choices that aren’t necessarily in their best interest.

47% of women have no retirement savings at all

Only 26% percent of women are saving for retirement and are comfortable with the amount they are saving; 47% have no retirement savings at all; and the remaining 27% are saving but not to the level that they want.

It’s important to specify what women with no retirement savings at all could be missing out on. If someone who is currently 30 years old put just $20 a month into a retirement savings account at 7% interest, they would have approximately $34,000 in savings by age 65. This $20 a month is the equivalent of five lattes or one streaming service subscription.

Even small investments in retirement can yield large returns.

Women may feel that it isn’t worth it to save for retirement if they can only put a small amount of money away, but a small amount of money at age 30 becomes a much larger amount at age 65.

Resources and support are limited

Retirement matching is limited, and considerably more so for parents. Even without an employer that offers a retirement matching program, there are still excellent financial reasons to invest for retirement. Don’t assume that without a retirement match, saving doesn’t make sense.

Only 32% of women have access to paid maternity leave, leaving them to find other ways to finance time off with a new baby. Using a percentage of savings to fund maternity leave has clear costs. Taking $1,000 out of a retirement account at the age of 30 results in $11,000 less in retirement savings at age 65. Taking out $10,000 would lower savings at retirement by over $100,000.

And it is an issue that women cannot tackle alone. We need better paid maternity and parental leave across the board.

How should moms save more for retirement?

The good news is that it’s never too late to start saving. Remember: Small changes can yield large dividends in the long run.

Assess your savings goals

Take into account your expected earnings trajectory and your retirement savings. Think about what you expect to be able to return to in terms of your career if you do decide to take time off. Ask yourself what the financial implications of scaling back really are.

Taking a hard look at your finances with your future in mind is the only way to make the best decision for the future you. Spreadsheets can be daunting, but tools like TIAA’s retirement calculator can easily help you determine your savings goals.

Open a retirement account

Once you’ve asked yourself these questions, open a retirement account with your bank and start depositing small amounts of money into the account each month. Check in with yourself and reassess regularly to see if you can increase the amount that you are saving.

A note on retirement planning for moms

Childbirth can be a big opportunity to motivate financial change. The downsides of not saving for retirement are large, but the solutions are more attainable than you might realize. With the miracle of compounding interest, and the way that small changes can yield large benefits, we can prompt more meaningful savings for more women—and it’s never too late to start.