Retirement planning is important for all Americans, but the importance is heightened for women. The retirement deck is stacked against women in several ways, including generally lower pay compared to men and lower Social Security benefits upon retirement. Social components include greater likelihood of caregiving responsibilities resulting in increased part-time work or time out of the workforce. Since women outlive men by 4.8 years on average, they also have a longer retirement period.
Findings from the recent Transamerica Retirement Survey of Workers reinforce the precarious position that women can face in retirement. Overall, only 14% of female workers are "very confident" that they can maintain a comfortable lifestyle with a full retirement. Many expect to work in retirement (49%), or delay retirement beyond age 65 with the possibility of no retirement (54%). Of those closest to retirement, the Baby Boomers, 64% have no Plan B in case they have to retire early for any reason.
The survey results suggest that women's concerns are warranted. Women do participate in retirement programs to the extent possible, as 77% of those who are offered employer-based retirement plans participate with a median personal contribution level of 7%. In addition, 55% of respondents have non-work related retirement accounts such as IRAs. However, only 66% of female workers were offered work-related retirement plans.
For 28% of the respondents, part-time work is leading to lower benefits. Another 67% believe they are harmed in retirement savings by having to take time out of the workforce for caregiving duties. As a result, too many women are struggling to meet their retirement goals.
Just what are those goals? The median estimate was $800,000 for financial independence in retirement, but the majority of those estimates (57%) were characterized as pure guesswork. Only 36% of women use professional financial help and only 77% of those do so for retirement investing.
Fortunately, the survey offers some steps for women to improve their retirement outlook.
- Have a Written Retirement Plan – If you have no plan or just an off-the-cuff one, take the time to think through your needs in future retirement. Seek professional advice if you need help estimating your total retirement target and how much money you need to save annually to get there. Educate yourself on retirement strategies and learn how to take maximum tax advantages, schedule withdrawals from your retirement accounts, and maximize your Social Security benefits with a filing strategy.
- Plan Your Savings – Once your targets are in place, plan out your annual savings and make the income and spending adjustments necessary to meet that savings goal. Take that goal into account when making major life decisions.
- Participate in Retirement Plans – Max out your contributions to retirement plans, and treat your retirement benefits as part of your salary instead of a side benefit. If no retirement benefits are available in your current job, ask for them or consider switching jobs.
- Have a Plan B – Unpleasant as it is, you need to consider what your best options are for unexpected expenses, job loss near retirement, health issues, or other derailments of your plan. Rank your cost-cutting choices, and consider where insurance can help you the most.
The final recommendation from Transamerica: Talk openly about your retirement plans and needs with your family, as well as with close friends. They will provide support and be a useful sounding board with respect to plans. Most importantly, there will be no misunderstandings of expectations. If you are expecting to be supported by children who are not willing or able to do so, it is best to clear up the issue now.
Do not let fear of retirement finances keep you from taking the necessary actions to plan your retirement and act on that plan. The sooner you start, the more likely you are to overcome the special retirement obstacles that women face.
Brad is a Registered Representative with, and Securities and Advisory Services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. CA Insurance License #: 0B22199.
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