Retirement Planning for Women: Making Those Years Count

Retirement Planning for Women: Making Those Years Count

Why living longer means you have to save that much harder

On average, women tend to live a few years longer than men. Scientists and comedians have tried for years to get to the bottom of it, with no luck really. This means a couple of things for women, though — first, you score a point in the battle of the sexes. It also means you need to be more financially prepared for retirement.

Women retire on Venus

With a longer life expectancy, you’ll most likely have more time to enjoy your retirement. So far, so good. But here’s the catch: Living longer means you have a greater chance of outliving your retirement savings. And while gender equality has come along in leaps and bounds statistically, you’re still at a disadvantage when it comes to accumulating money for your retirement. The bottom line is that you’ll need to save more to live comfortably in retirement.

The financial obstacle course

Numerous statistics have shown that, on average, women earn less than men, which means they have less money to invest. Women are more likely than men to take time from their careers for family responsibilities, which can mean lower overall career earnings. Lower income and less time working means lower Social Security income. In general, Social Security comprises a greater percentage of the total income for unmarried women 65 and older, in contrast to unmarried elderly men and couples. In short, the sooner you create a retirement plan, the more likely you’ll be able to overcome these financial hurdles.

Think about your future

The longer you put off planning, the greater the chance you won’t have enough to spend in retirement. So get to it! Envision where you’d like to be. Think about how you want to spend each day, where you want to live, how often you’d like to travel. A clear vision of how you want to spend your retirement will help motivate you to reach your goals.

Take stock of where you are

Now take stock of where you are financially. Look at your spending, debt and savings, and ask yourself where you could spend less. When you’ve established how much money you can free up, then decide what to do with it. Keep in mind that a few small sacrifices now can add up to a lot later. 

Put your money to work

This is hugely important. Many employers offer tax-deferred retirement investment plans, such as 401(k), 403(b) or 457 plans — all of which are valuable tools for investing in your future. It almost always makes sense to participate in your employer’s plan and contribute as much as you can. The power of tax-deferred compounding can really add up.

Beyond the plan

Here are some smart tips as you continue planning. Talk with your spouse. It’s important to have a conversation about what your retirement needs are and how much it’ll cost you each month. If you go through a divorce, it’ll impact your planning. For example, if you were married for 10 years, you’re entitled to Social Security payments equal to 50% of your ex-husband’s benefits. And any share of your ex-husband’s pension or 401(k) plan can be negotiated as part of the divorce settlement. Learn investing and consider how much risk you’re willing to take to earn potentially higher returns.

Plan to spend later

Since you’ll likely be retired for 20 to 30 years, think about how to maximize your resources. First, create an emergency fund that could cover up to six months’ worth of expenses. Then divide your remaining assets into three categories.

  • Short-term money – covers the necessities, such as food, housing, utilities, taxes, health care, insurance and emergencies. Potential sources include Social Security, pension, part-time income and rental income.
  • Mid-term money – covers the niceties, such as travel, entertainment, house/car repairs and education. Potential sources include retirement plans, interest/dividends, IRAs, home equity, employment income and bank savings/CDs.
  • Long-term money – includes money that you can grow to replenish short-term funds or compensate for inflation. Potential sources include long-term stock investments, bonds and other types of assets such as cash value life insurance.

It's your future

There are some obstacles on the path to retirement. But by saving and developing a sound plan, you can overcome those obstacles and take control of your financial future. To learn more about how to make the most of your retirement savings, speak with a financial professional.

This material is provided for general and educational purposes only; it is not intended to provide legal, tax or investment advice. All investments are subject to risk. We recommend that you consult an independent legal or financial advisor for specific advice about your individual situation.

The tax information herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.