Ladies: Don’t Plan for Your Retirement Like a Man

In the 1930s, Ginger Rogers beautifully synchronized her dancing in lockstep with Fred Astaire’s footwork. Only, as the saying goes, she did it backwards and in high heels.

Unfortunately, when it comes to retirement planning, women face a similar challenge: a set of gender-specific financial obstacles that require more intensive efforts to overcome.

Here’s a look at these retirement savings challenges, and what women can do to avoid getting tripped up by them.

The $849,000 Gap

There are three main factors that make it harder for women to save enough for retirement:

1. Longer life expectancy. Women live longer than men — statistically, five years longer on average. According to 2009 data, life expectancy for a woman is nearly 81 years compared to almost 76 years for a man.

2. Taking more time off work to care for family members. Leaving a job to provide care for a child or elderly relative falls predominantly on women. “The average woman left the workforce for 11.5 years — not always all at once — to care for children, elderly parents, and a chronically ill spouse,” according to a 2001 report titled “The State of Older Women in America.”

3. Less pay for equal work. On average, a woman is compensated $0.77 on a man’s dollar, according to a recent study from the Institute for Women’s Policy Research based on 2011 U.S. Bureau of Labor Statistics.

So just how much are these disparities costing a woman in terms of her retirement planning? All told, add up these costs over a lifetime, and we’re talking about an $849,000 penalty for being born female.

If a woman entering the workforce today lives five years longer than a man, takes four years out of the workforce to care for loved ones, and makes an average of $30,800 per year (77% of his $40,000 annual salary), then she needs to save roughly $4,000 per year (before taxes) during the course of her working life toward retirement. In comparison, he needs to save $3,080 per year (before taxes) over the course of his working life. That works out to nearly 13% of her annual salary, as opposed to 7.7% of his.

Fair? No. Reality? Yes.

These disparities make it critical for women to understand their retirement planning options and to take steps now to narrow the savings gap. Here are some options:

If You’re a Working Woman:

If You’re Married, But Don’t Work:

If You’re Self-Employed:

Get a handle on your finances so these disparities don’t prevent you from dancing your way into a glorious retirement.

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Motley Fool contributor Nicole Seghetti does not own shares in any of the companies mentioned above. You can follow her on Twitter @NicoleSeghetti.

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