Here’s how young women are deciding how much to save for retirement

When it comes to retirement planning, earlier is generally better, but several factors affect how much young women are saving, according to financial experts.

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

But despite the age differences among these women, experts can offer them cross-generational threads of financial advice for building wealth.

“A lot of people want to start with setting money aside for retirement,” Braxton said. “But that really is contingent upon what you’re earning and how you spend it.”

Young women need to focus on earning what they’re worth, considering the pay gap’s intersection of gender and race to assess income potential, she said. Then she suggests “filling the buckets,” referring to categories such as retirement savings, a cushion fund and brokerage account.

While the first retirement savings goal should be contributing enough to your workplace 401(k) or 403(b) plan to receive the full employer match, you can aim to actually reach your annual deferral limit 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 driven,” Braxton said.

Her clients also focus on a “cushion account” of six to 12 months of expenses in cash for emergencies or other priorities, such as career changes or starting a business, because “younger generations want flexibility.”

Another bucket may include a Roth individual retirement account, a savvy option to max out in lower-earning years, with a $6,000 limit for 2022, she said.

And taxable brokerage accounts offer added versatility without a penalty to tap the money before age 59½.

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

Braxton likes to see progress in all the buckets, and she tailors clients’ percentages for each one.

Major life milestones, such as entrepreneurship, getting married, having children or caring for older relatives may also affect how much young women are saving for retirement.

Lauryn Williams, a Dallas-based CFP, founder of firm Worth Winning and a member of CNBC’s Financial Advisor Council, said her clients are often juggling multiple priorities. 

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

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

“It’s putting all the options on the table and then letting the client make the decision,” Williams said. “But realizing there’s not a right or wrong answer to being able to achieve it.”