How a Woman Can Fund Her Own Retirement

Women do so much for others during their lives.

If you’ve spent your years taking care of other people, you may expect that someone will take care of you as you get older. However, life doesn’t always happen the way we hope or expect it to, and unforeseen circumstances can cause extra stress if your financial security depends on someone else.

Why should women pay more attention to their own retirement needs? On average, women live longer than men, but they often aren’t paid as much as men for equivalent work, and they may have taken time off during their careers to care for children, parents, or a spouse. They may therefore need to make a smaller amount of savings last longer.^1,2

Some women plan to retire on their spouse’s Social Security income, but that source alone cannot pay for the average person’s medical care during retirement -- let alone covering all their basic expenses.³ Unfortunately, many women will see a large drop in their income as soon as a spouse dies.⁴ Single, divorced, and widowed women over the age of 65 are disproportionately impoverished in the United States.⁵

A solid retirement plan need not be complicated. Here’s how you can lay the groundwork for a more secure future.

• Social Security for most of us - Most American workers can count on something from Social Security after we retire. This may be based on our own earnings or a spouse’s earnings. You can be eligible to start receiving this lifetime income stream as early as age 62 (even earlier if you’re widowed or disabled); however, waiting until you’re 70 can substantially raise the amount of your monthly benefit -- and the payments will keep coming for the rest of your life.⁶
• Pension for some - A few of us may still get a pension from working for the government or certain private companies long enough to be vested. This is a rarer circumstance nowadays, but it can lead to an additional lifetime income stream that, together with your Social Security income, will cover more of your daily living expenses -- perhaps even all of them, depending on your lifestyle and where you live.
• Retirement savings if you’ve been willing and able - Your employer may have contributed to a retirement plan such as a 401(k) on your behalf, or you may have set up your own IRA and made sacrifices in order to fund it. Your money can accumulate in a pre-tax (qualified) savings plan until you’re in your early 70’s, at which point you’ll be required to take a Required Minimum Distribution (RMD) out as taxable income each year. Plans funded with after-tax dollars have no RMDs.⁷
• Savings bonds, CDs, and CD-type annuities to guard your principal - These safe money strategies pay interest, which is taxable income. In a low-interest market, such investments may not grow enough to keep up with the pace of inflation or increased cost of living, so you may see an erosion of your purchasing power.⁸
• Income annuity for added security - If you’re female, your chances of living into your 80’s and 90’s are greater than ever. You may find that your pot of retirement funding starts to shrink just as your medical and home care expenses start to rise. This period of life would be less scary and more comfortable with a dependable income, and that is where an annuity might fit into your retirement plan. If you set aside some savings in an annuity, it can grow tax-deferred until your other retirement funds are depleted, then you can begin taking payments from the annuity. Income annuities pay out for the rest of your life, offering security and peace of mind.⁹
While you’re taking care of your loved ones, take what steps you can to put some of these strategies in place, so that you’ll be taken care of too.

Watch the video below for more on this topic: Retirement Planning for Women.

Citations.

1 - 1 - https://www.forbes.com/sites/teresaghilarducci/2021/09/20/unequal-pay-bites-women-in-retirement/

2 - https://insights.som.yale.edu/insights/why-aren-t-women-saving-enough-for-retirement

3 - https://hvsfinancial.com/wp-content/uploads/2020/12/2021-Retirement-Healthcare-Costs-Data-Report.pdf

4 - https://www.incharge.org/debt-relief/financial-help-widows/

5 - https://www.ssa.gov/policy/docs/population-profiles/marital-status-poverty.html

6 - https://www.ssa.gov/benefits/survivors/ifyou.html 7 - https://www.thebalance.com/life-expectancy-and-required-minimum-distributions-2894541

8 - https://www.kiplinger.com/retirement/annuities/602301/the-case-for-indexed-annuities

9 - https://www.kiplinger.com/article/retirement/t003-c032-s014-are-annuities-a-baby-boomer-retirement-solution.html