Challenges For Women in Retirement – And How To Address Them

When anticipating our “golden days of retirement”, we might simply fantasize about starting the day with a lazy breakfast and ending it with a moonlit walk. But when we factor in the prospect of supporting ourselves later in life, those golden days start to look a little less bright for many women.

In fact, according to the TransAmerica Center for Retirement Studies, only one in eight women are “very confident” they will retire with a comfortable lifestyle, while forty-six percent are “not too confident” or “not at all confident.”

If women feel somewhat behind the eight ball, it’s for good reason. According to the Center for American Progress, they earn less on average than their male counterparts, resulting in reduced Social Security benefits and lower contributions to employer-sponsored 401(k) programs resulting in lower retirement savings.

Building on this domino effect, women live longer than men and are also more likely to take time out of the workforce to be caregivers. Put it all together, and it’s an intimidating series of hurdles. But the situation isn’t impossible. By recognizing the challenges and planning to work around them, women can put themselves confidently on the path to a more secure retirement.

1) Understand your retirement budget

Let’s assume that your retirement spending will equal about 80 percent of your pre-retirement spending. From there, consider the following:

• Social Security. If you have a spouse, make a plan for claiming Social Security as a couple. It’s usually best for the spouse with the higher income to wait as long as possible to claim benefits.

• Leisure spending. When you stop working, you’ll have time for activities like travel or golf, so factor those into your budget.

• Calculate your tax rate. Make sure you’ve run the numbers on your expected income in retirement, taking into account what you’ll pay in taxes overall.

2) Save more

Per AARP.org, the maximum monthly Social Security benefit in 2021 is only about $3,000 for someone filing at full retirement age, so you may have to save more to support your income needs in retirement.

• Save at work: A 401(k) plan allows participants to put away up to $19,500 in 2021. If you aren’t maxing out your 401(k) contribution, get there as quickly as you can. In addition, if you are eligible, take advantage of your employer’s Health Savings Account (HSA). If you use the funds for eligible medical expenses, there are no taxes on the withdrawals—something an IRA can’t boast.

• Make catch-up contributions: If you’re 50 or older, you can make additional contributions to your 401(k) plan (up to $6,500 in 2021) and any IRAs you might have (an additional $1,000).

• Save outside your work account: If you’re eligible for a Roth IRA, this will give you a mix of tax-deferred and post-tax earnings in retirement. If you’re not eligible, you can still contribute up to $6,000 ($7,000 if you’re 50 or older) to an IRA account in 2021.

• Check your progress: One rule of thumb is that you should aim to save at least three times your salary by age 40, eight times your salary by age 60, and 10 times your salary by age 67, according to Fidelity Investments.

3) Pay down debt

Reducing debt before retirement gives you greater flexibility in retirement. Here’s how to whittle it down:

• Understand your payoff picture. Make a spreadsheet of all debts on your balance sheet, the payments on each, and the time it will take to pay them off at your current pace.

• Make a debt pay-off plan. Consider getting more aggressive in paying off outstanding debt on a monthly basis.

• Make a date to be mortgage-free. A home loan is usually the largest chunk of debt in your portfolio. And it’s not bad debt, but it’s smart to try to enter retirement without that recurring bill on your balance sheet.

4) Consider long-term care insurance

Of those who purchase a long-term care policy at age 60 with a 90-day elimination period, 35 percent will use that coverage, according to actuarial data.

• Understand the costs. Estimate the cost of care in your area for both the

present and future.

• Shop in your mid-50s. This is a good time to shop for long-term care, but if you’re in good health, you can shop as late as age 60 to 65. Remember, the later you buy, the bigger your premiums will be.

• Consider other products. Some life insurance policies offer long-term care or a chronic illness rider that allow you to receive some of your death benefits early.

5) Create a guaranteed income stream

An annuity is an insurance product that guarantees a series of income payments, either now or in the future. Annuities are offered in a variety of flavors, ranging from paying a set rate of return to allowing you the ability to participate in the market. Your financial advisor can help you determine which is most appropriate for your investment mix.

With enough planning and preparation, the retirement challenges women face don’t have to be roadblocks. Establishing a strong relationship with a professional financial advisor can help you stay on track and make decisions today that most benefit you tomorrow.

For more information on how The Private Bank can help you achieve your investment goals, visit unionbank.com/theprivatebank.