Here’s how young women decide how much to save for retirement

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When it comes to retirement planning, it’s usually better to be earlier, but several factors affect how much young women save, according to financial experts.

For retirement planning purposes, the demographic referred to as “young women” may include Gen Z, Millennials and some Gen Xers with 20 or more years before leaving the workforce, said Lazetta Braxton, financial planner certified based in New York, co-founder and co-CEO. of 2050 Wealth Partners and a member of CNBC’s Financial Advisor Council.

But despite the age differences between these women, experts can offer them intergenerational financial advice to build wealth.

“A lot of people want to start by putting money aside for retirement,” Braxton said. “But it really depends on what you earn and how you spend it.”

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Young women need to focus on earning what they are worth, considering the intersection of the gender and race pay gap to assess earning potential, she said. Next, she suggests “filling the buckets,” referring to categories like retirement savings, a cushion fund, and a brokerage account.

While the primary retirement savings goal should be to contribute enough to your workplace’s 401(k) or 403(b) plan to receive the full employer match, you can aim to reach your carryover limit. annual for such plans, she said, which is $20,500 for 2022.

An estimated 12% of employees maxed out 401(k) plans in 2020, according to Vanguard. But “it’s really cash flow and goals,” Braxton said.

It’s really cash flow and goal driven.

Lazetta Braxton

Co-founder and co-CEO of 2050 Wealth Partners

Its customers are also banking on a “cushion account” of six to 12 months of cash spending for emergencies or other priorities, such as career changes or starting a business, because “younger generations want flexibility”.

Another bucket can include a Roth Individual Retirement Account, a smart option for maximizing low-income years, with a $6,000 limit for 2022, she said.

And taxable brokerage accounts offer added versatility with no penalty for tapping money before age 59.5.

On average, younger women, defined as ages 18-35, begin investing in a brokerage account at age 21, compared to age 30 for women age 36 and older. according to Loyalty.

Braxton likes to see progress in all buckets, and she tailors client percentages for each.

Major life milestones, such as becoming an entrepreneur, getting married, having children or caring for older parents can also affect how much young women save for retirement.

Lauryn Williams, Dallas-based CFP, founder of the Worth Winning Company and member of CNBC’s Financial Advisor Council, said her clients often juggle multiple priorities.

“I make everything a conversation,” she said. “And I think the benchmarks play a role in helping us understand globally where we need to be.”

For example, someone may temporarily reduce their retirement savings to pay for fertility treatments or to start a business. However, they may need to increase their future savings to meet their initial goals.

“It’s about putting all the options on the table and then letting the customer make the decision,” Williams said. “But realizing that there is no right or wrong answer to be able to achieve this.”

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