women discussing retirement planning financial questions

3 Retirement Planning Financial Questions for Women Entrepreneurs

Women are becoming entrepreneurs at an unprecedented rate. The number of women-owned firms in the United States has grown by 114 percent over the past two decades, 2.5 times the national average, American Express OPEN research shows. Women are turning to entrepreneurship for a number of reasons, including better life-work balance, greater independence and higher income. But while women are seeing many benefits from entrepreneurship, one challenge to running your own business is that you bear more responsibility for developing your own retirement plan. A Transamerica survey found that 46 percent of women aren’t confident they’ll be able to retire comfortably, and 56 percent plan to work beyond age 65 and aren’t sure they’ll even be able to retire at all.

If you’re concerned about your future in retirement, the time to start planning is now. Here are three financial questions that women entrepreneurs should consider when planning their retirement.

How Much Will I Need to Live on?

One of the most important retirement planning questions to consider is how much income you will need in retirement in order to support the lifestyle you want. A good way to start estimating this is to begin with your current monthly take-home pay and calculate what expenses currently come out of it (such as housing costs) that you’ll need to pay out-of-pocket during retirement, says certified financial planner Dana Aspach. You can then make adjustments by factoring in any variable expenses you’ll need to cover (for example, vacation budgets and home and car maintenance), as well as any expenses that will cost less during retirement (such as reduced costs of raising children who will be adults then). Vanguard provides a retirement expenses worksheet to help you estimate what you’ll need to budget. As a general rule, you’ll need at least 70 percent of your current income, but 100 percent is better in case you plan additional expenses such as travel, says financial advisor Dan Wu.

How Much Do I Need to Save Each Month?

Once you have an idea of your retirement expenses, the next step is to calculate how much you’ll need to save up each month in order to cover your retirement budget. To estimate this, you’ll need to factor in variables including your annual income, how much you’re currently saving for retirement each year, your estimated Social Security income, your age, the age at which you plan to retire, how many years you expect to live after retirement and the annual rate of inflation. Sites such as Bankrate provide retirement savings calculators you can use to see how much you’d save if you continued at your current savings rate until you retire. You can then see whether your current savings rate is enough to meet your retirement income needs. If not, you can make adjustments, such as putting more of your monthly income aside for retirement savings. As an entrepreneur, you may not have an employer-sponsored 401(k) plan, so you may wish to consider alternative retirement plan options for the self-employed, such as traditional and Roth IRAs, solo 401(k) plans, SEP IRAs and SIMPLE IRAs.

What Insurance Will I Have?

As an entrepreneur, finding your own insurance is a major priority, and it’s even more important when doing retirement planning. You’ll need a plan that both covers your health care needs and fits within your retirement expense budget. If you’re self-employed, you can purchase an affordable health insurance plan directly from a provider or through a broker, or if you’re subsidy-eligible, you can use the Healthcare.gov centralized insurance marketplace to find a discounted plan. When you go through the application process, you’ll find out if you qualify for premium tax credits or other savings, as well as free or discounted Medicaid and CHIP programs in your state. If you have Medicare coverage, you may want to look into a Medicare supplement plan. If you have a family, you will need to consider their coverage if you plan on retiring before your children are on their own. When estimating income for marketplace savings, use the year you’ll be getting coverage as a basis for calculation, not your last year’s income.

Your future living expenses, your current savings plan and your insurance coverage are three key financial considerations to take into account when planning for your retirement. Taking care of these essentials will help lay a firm foundation for a solid financial future.