Five Key Retirement Planning Tips For Women

Many American women face an uphill battle when it comes to retirement. While women statistically live longer than men in retirement, they amass less in retirement savings because they earn less over the course of their careers, are more likely to interrupt their careers for family responsibilities and tend to invest more conservatively compared to men.

Also, because of the gender pay gap, they have less to contribute on average toward their retirement savings, resulting in lower lifetime savings to cover long-term living expenses. This results in more women at risk of falling into or near poverty compared to men. Women are 80% more likely than men to be impoverished when they’re 65 or older, according to a 2016 report from the National Institute on Retirement Security. About 9% of women age 65 or older lived at or below the federal poverty level at that time, compared to 5% of men.

With the U.S. fast-approaching “Peak 65”—the greatest surge in American’s turning 65 in the nation’s history—in 2024, now is the time to prepare.

The global pandemic has further exacerbated this pre-existing gender disparity and disproportionately affected women. Since last February, nearly 3 million women have left the workforce, according to the Bureau of Labor Statistics. 72% of women with investable assets of $100,000 or more said the crisis has negatively impacted their ability to retire, according to a January survey by Nationwide Retirement Institute.

With the U.S. fast-approaching “Peak 65”—the greatest surge in American’s turning 65 in the nation’s history—in 2024, now is the time to prepare, educate and equip women approaching or living in retirement, with better solutions.

There are several steps women can take now to improve their chances of successful retirement security later:

  • Save aggressively: If an employer offers a workplace retirement plan—like a 401(k) or 403(b) account—join it as soon as you are able and contribute as much as you’re able. If you don’t have a retirement plan through work, or you want to contribute additional money for retirement, consider opening an individual retirement account, or IRA. These tax-advantaged accounts can help your savings grow, and your investments can compound over time. In addition to the above, you should plan to save for additional sources of retirement income – home equity, stocks, pensions, etc. – to help ensure your essential expenses are covered for as long as you live.
  • Create a budget: A retirement budget can help you plan how your money will be spent and you can update it as necessary to accommodate any changes in your financial situation. There are many personal finance tools and budget apps available to help you plan and manage your funds, figure out the risk of having a gap in your monthly income, stay on track, and alert you when you overspend. Begin by understanding how much income you need to cover your essential monthly expenses, such as your mortgage or medical expenses, utilities, groceries, gym fees or car payments. This will help you determine whether you’re at risk of having a gap between the money you’ll have and the money you’ll need. Step two is finding ways to help cover these expenses with protected lifetime income from an annuity – income you count on receiving every month, for the rest of your life, to help cover the gap that Social Security leaves. When you Check Off the Basics, you can use the rest of your savings to enjoy the retirement you want.
  • Consider consulting a financial professional: Only 14% of women frequently discuss saving, investing, and planning for retirement with family and close friends, according to a survey by the Transamerica Center for Retirement Studies. Hiring an experienced and skilled financial professional can help you establish a plan and get your financial affairs in order so that you can live the life you want in retirement.
  • Expand your financial knowledge: Basic financial knowledge is important for making informed financial decisions. The Alliance for Lifetime Income recognizes this, and recently released a second edition of its Annuities Language Glossary, a free resource that explains annuities—the only way to access protected lifetime income beyond Social Security and a pension—in more simpler, familiar and understandable terms.
  • Think long term: Nearly 1 in 5 women have nothing saved for retirement, a 2020 CNBC/SurveyMonkey Women at Work survey found. Women often place other saving and spending needs of their family ahead of their own retirement, which leaves them ill-prepared for this next chapter in life. There’s a good chance you could live 20, 30 or more years in retirement, so it’s important to establish long-term goals and a financial plan that covers your whole life in retirement. Effective planning is the best first step and can help improve your chances of retiring comfortably later.

For more on this topic, see the Your Money Map conversation with Jean Chatzky featuring Jeannette Bajalia on the Alliance for Lifetime Income Facebook page.

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