Investing Rules for Women: Invest for Your Retirement

Once you start putting money in that retirement purse, don't take it out

There are countless resources available to help you learn the fundamentals of investing. This week, Black Enterprise shares the top five investing rules for women. Today’s tip: Invest for Your Retirement.

Kimberlea Rodney, 32

(Photo by Lonnie C. Major)

It’s admirable that Kimberlea Rodney began investing for retirement at the ripe old age of 22. Fortunately, when she started her job with what was then the New York City Board of Education, all employees were required to invest at least 3% of their income in the employer-sponsored retirement account. After 10 years on the job, Rodney has $24,000 between a tax-sheltered annuity and her Teacher’s Retirement System accounts.

“I stopped contributing for a few years when I was in forbearance with my student loans, but that was one of the worst things I could have done,” says Rodney, a middle school teacher. She also borrowed $9,000 from the account a few years ago to use as her down payment on a co-op in Brooklyn, New York.

Though Rodney needed the cash, she broke one of the cardinal rules of investing. “Once you start putting money in that retirement purse, do not take it out,” declares Deborah Owens, co-author with Brenda Lane Richardson of A Purse of Your Own: An Easy Guide to Financial Security (Fireside; $15). Owens says borrowing from your retirement account should be your last option. She advises taking out a loan or working an extra job instead. “If you are going into that purse, you are living beyond your means,” she warns. Fortunately for Rodney, she’s planning to work another 30 years, so she has time to recoup her lost earnings.

There are a variety of retirement investment vehicles available of which women can take advantage, whether they’re employed full time, running part-time businesses, or not working. “The days of working for the same employer for many years are gone, especially for women,” says Owens. “Even if you have a part-time job selling Mary Kay or Pampered Chef or any of those side businesses, you can contribute to an [Individual Retirement Account] or [simplified employee pension] IRA.” Last year, the SEP IRA contribution limit was $49,000; in 2008, it was $46,000. With the Spousal IRA, nonworking wives can contribute a lesser amount, usually up to $5,000.

Also, if you’re faced with the choice of paying your children’s college education or saving for retirement, choose retirement. You’ve heard it before but it bears repeating: Your children can get a scholarship, but there are no scholarships for retirees. “With divorce rates being what they are, and with most women outliving most men, women must invest for the long term,” says Brackens.

—Sakina P. Spruell

ACTION PLAN

–Figure out how much money you need for retirement. A single retirement or Social Security account may not be enough to fully support you during your nonworking years, so work with an adviser to determine how much money you’ll need, and by when. Calculators like those offered at Bankrate.com (www.bankrate.com) can help. Just click on the tab labeled “Retirement” and go to “Retirement Calculators.”

–Contribute set amounts to retirement accounts to achieve your goals. If your employer has a 401(k) or 403(b), contribute as soon as you’re eligible, and at least up to the amount your employer matches. If you’re self-employed, contribute to a SEP IRA; if you’re a nonworking wife, you can contribute to a Spousal IRA.

–Consider supplementing your retirement income with a rental property or a small business.

Further Reading

Investing Rules for Women: Full Series
Investing Rules for Women: Start Early
Investing Rules for Women: Educate Yourself
Investing Rules for Women: Get Over Your Fear
Investing Rules for Women: Don’t Go it Alone

A Woman’s Guide to Money Management

This article originally appeared in the March 2010 issue of Black Enterprise magazine.

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