Retirement Planning for Women

Women face special challenges when planning for retirement. Because their careers are often interrupted to care for children or elderly parents, women may spend less time in the workforce and earn less money. As a result, their retirement plan balances, Social Security benefits, and pension benefits are often lower.

In addition to earning less, women generally live longer than men, and they face having to stretch limited retirement savings and benefits over many years. To meet these financial challenges, you'll need to make retirement planning a priority. Step one: Identify a trusted financial planner and put your plan on paper.

Begin Saving Now
To maximize your chances of achieving a financially secure retirement, start with a realistic assessment of how much you'll need to save. If the figure is substantial, don't be discouraged – the most important thing is to begin saving now.

The chart below shows how just $2,000 invested annually at a 6% rate of return might grow over time1:

Age you begin saving for retirement Amount you'll have saved by age 65
20 $451,016
30 $236,242
40 $116,313
50 $49,345
60 $11,951

This is a hypothetical example and does not reflect the performance of any specific investment. Results assume reinvestment of all earnings and no tax.

Save as Much as You Can—You Have Many Options
If your employer offers a retirement savings plan, such as a 401(k) or a 403(b), join it as soon as possible and contribute as much as you can. It's easy to save because your contributions are deducted directly from your pay, and some employers match a portion of what you contribute.

If your employer offers a pension plan, find out how many years you'll need to work for the company before you're vested in, or own, your pension benefits. Women struggling to balance work and family sometimes shortchange their retirement savings by leaving their jobs before they become vested in their pension benefits. Keep in mind, too, that because your pension benefits will be based on your earnings and on your years of service, the longer you stay with one employer, the higher your pension is likely to be.

Most employer-sponsored plans allow you to choose from several investment options (typically mutual funds). If you have many years to invest or you're trying to make up for lost time, give special consideration to growth-oriented investments such as stocks and stock funds. Historically, stocks have outperformed bonds and short-term instruments over time, although past performance is no guarantee of future results. However, along with potentially higher returns, stocks carry more risk than less volatile investments. A financial professional can also help you evaluate your retirement plan options.

Save for Retirement—No Matter What
Even if you're staying at home to raise your family, you can—and should—continue to save for retirement. If you're married and file your income taxes jointly, and otherwise qualify, you may open and contribute to a traditional IRA or Roth IRA as long as your spouse has enough earned income to cover the contributions. Both types of IRAs allow you to make contributions of up to $5,500 in 2013, or, if less, 100% of taxable compensation. If you're age 50 or older, you're allowed to contribute even more—up to $6,500 in 2013.

Plan for Income in Retirement

There is no one-size-fits-all solution to effective retirement planning. As you consider your options for asset accumulation, it’s important to work with a trusted financial advisor.
Do you worry about outliving your retirement income? Unfortunately, that's a realistic concern for many women. At age 65, women can expect to live, on average, an additional 19.9 years.2 Many will live into their 90s. This means that women should generally plan for a long retirement that will last at least 20 to 30 years. Women should also consider the possibility of spending some of those years alone. According to recent statistics, 42% of older women are widowed, 11% are divorced, and approximately half of all women age 75 and older live alone.3 For married women, the loss of a spouse can mean a significant decrease in retirement income from Social Security or pensions.

 

So what can you do to ensure you'll have enough income to last throughout retirement? Here are some tips:

  • Estimate how much income you'll need. Use your current expenses as a starting point, but note that your expenses may change dramatically by the time you retire.
  • Find out how much you can expect to receive from Social Security, pension plans, and other sources. What benefits will you receive if you become widowed or divorced?
  • Set a retirement savings goal that you can work toward, and keep track of your progress.
  • Save regularly, save as much as you can, and then look for ways to save more – dedicate a portion of every raise, bonus, cash gift or tax refund to your retirement savings.
  • Consider purchasing long-term care insurance to help protect your retirement savings and income from the high cost of nursing home  or home health care.

Ready to Take Action?

There is no one-size-fits-all solution to effective retirement planning. As you consider your options for asset accumulation and ultimate distribution, it’s important to work with a trusted financial advisor to structure a retirement plan based on your timeline, resources, and quality-of-life expectations.

Email an advisor or call us at 800-228-9798.

1Forefield, a division of Broadridge Financial Solutions, Inc.
2National Vital Statistics Report, Volume 58, Number 19, 2010
3U.S. Department of Health and Human Services Administration on Aging, A Profile of Older Americans: 2010

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