Retirement Planning - Why Women Need to Plan For Their Retirement


Time - for a good book, uninterrupted by a deadline or must-do project. Freedom - to take a present-laden trip to see the kids, help out at the community bazaar, or make a spur-of-the-moment decision to extend that ski weekend another two days. Peace of mind - to snuggle on the couch until midnight on a week night watching a favorite movie, not worrying about this bill or that one, or the need to obey the call of an alarm clock at the crack of dawn.

Heaven? No. Just retirement. If you're looking forward to enjoying a peaceful, comfortable retirement someday, you're not alone.

With improved life expectancy and the need to fund more years post retirement, over 55s are most likely to have faced up to the prospect of working later. The main reasons stated were stretched finances with pension pots, savings, investments and house values all being hit by the recession. According to the U.S. Bureau of Labor Statistics1, between 1977 and 2007, employment of workers 65 and over increased 101 percent, compared to a much smaller increase of 59 percent for total employment (16 and over). The number of employed men 65 and over rose 75 percent, but employment of women 65 and older increased by nearly twice as much, climbing 147 percent. As a woman, you may have to put in more effort before you get to enjoy a worry-free, financially secure retirement.

One reason is the "longevity factor." According to a global comparison in 2006, women in the United States outlive men by five years-80.8 form women and 75.0 for men2. Those are just the life expectancies at birth. By retirement, the gap widens even further.

Plus, most women have fewer retirement resources. According to the Social Security Administration3, in 2007, the average annual Social Security income received by women 65 years and older was $10,685, compared to $14,055 for men. Also in 2007, 47 percent of all elderly unmarried females receiving Social Security benefits relied on Social Security for 90 percent or more of their income.

These factors very likely will have a dramatic impact on your lifestyle and standard of living in your senior years. It doesn't matter whether you are married or single; whether you are young and just starting out or so close to retirement that you can almost read the headlines as you dream about leisurely Monday mornings with the paper in bed.

You will in all likelihood need more retirement income than you thought - and you are the one who must make sure it is there. How much will you need? That depends on a number of factors.

One Scenario
Let's assume that you will need $40,000 a year in today's dollars at retirement. Let's further assume that you will live six years longer than a man who is the same age as you. That means you will need an additional $240,000 in income! Some may come from Social Security; some may come from a pension at work. But you may need to make up the shortfall yourself - or run the risk of spending your retirement years struggling financially.

Recommendation: Plan for a long life. If possible, make maximum contributions to qualified plans through work. Sacrifice in other areas if necessary.

Dare to dream. By making little sacrifices today, you can lock in the retirement lifestyle and security you want tomorrow, helping to assure that your retirement years are in fact your golden years - safe, secure, free of financial worry.

The Income Factor
That women, on average, earn less than men is old news. What is not always so clearly understood is how this "income factor" can directly impact not only your standard of living today, but also your lifestyle in retirement. For many women, unless they start taking steps now, retirement may not be possible. Fortunately, there are steps you can take... but you need to get started.

The "gender income gap" is persistent and well-documented. According the 2009 The Shriver Report: A Woman's Nation Changes Everything4, for the first time half of the all U.S. workers are women. And nearly 4 in 10 mothers (39.3 percent) are primary breadwinners, bringing home the majority of the family's earnings, and nearly two-thirds (62.8 percent) are breadwinners or co-breadwinners, bringing home at least a quarter of the family's earnings. Also according to the Report, women are more likely to graduate from college, yet they earn less than men. The Report also states that the typical full-time, full-year woman worker brings home 77 cents on the dollar, compared to her male colleagues.

The simple math: Lower income can result in lower retirement benefits.

Most serious of all: Many women are not doing anything about their situation. According to The 2009 Retirement Confidence Survey5 conducted by Employee Benefit Research Institute (EBRI), workers who say they are very confident about having enough money for a comfortable retirement this year hit the lowest level in 2009 (13 percent) since the Retirement Confidence Survey started asking the question in 1993. Retirees also posted a new low in confidence about having a financially secure retirement, with only 20 percent now saying they are very confident (down from 41 percent in 2007).

Recommendation: It doesn't matter whether you are married or single; in your 20s or so close to retirement you can taste it. If you are not already actively and aggressively involved in making sure you will be financially secure, it's time to take the plunge. It doesn't matter whether you are married or single; in your 20s or so close to retirement you can taste it. If you are not already actively and aggressively involved in making sure you will be financially secure, it's time to take the plunge.

What To Do Right Now:

  • Contact Social Security to make sure your earnings records are right and to find out how big your benefits checks will be at retirement. The toll free number is (800) 772-1213. Or you can reach them online at:
  • Do the same with your pension administrator at work, as well as with all administrators from previous positions.
  • If possible, make maximum contributions to your employer-sponsored 401(k) and other qualified plans and IRAs, as well as saving after-tax dollars in annuities and other financial vehicles.
  • If you're married, work closely with your husband. Remember, odds are that you will outlive him; make sure your financial arrangements reflect that.
  • Look before you leap. As a rule, "If you change jobs frequently, over a period of years you may build up vesting with several employers, but you would have built up much more if you'd stayed in one place."
  • Your future is in your hands. Regardless of income, you will be the one who decides your level of financial security in retirement. Take charge of your retirement planning today.

For Love or Money
Joanie and Jake learned a valuable lesson recently. It seems that when Jake works, it is always for love AND for money. No questions asked. But when Joanie "works" - because she has alternated between keeping the home and earning a paycheck - it is either for love OR for money. The lesson: If they hadn't done some focused retirement planning together, Joanie risked being short-changed big time financially in her senior years. The story is fairly typical.

As a young bride, Joanie worked until the children came, then spent a decade as an at-home mom, followed by nine years in banking before a mega merger left her free, so to speak, to pursue other goals.

Today, they're empty nesters. While Jake works as a self-employed consultant from his office at the house, Joanie divides her time between part-time tax preparation and trying out the latest Martha Stewart recipe on Jake and the dog. It's a great life.

Here's the problem. When looking at their retirement plans, they discovered that after more than 30 years of going about her life's work - sometimes for pay, sometimes for love - Joanie's total retirement benefits will total less than $300 a month. Jake's - the payoff for three decades plus of uninterrupted workforce participation - will be more than ten times that.

The situation isn't all that uncommon. Unfortunately, many women may not feel properly prepared for the future, financially. Some are employed in settings that don't offer retirement plans to employees. Additionally, women are more likely than men to care for children and elderly or disabled family members. One study found that 69 percent of unpaid caregivers to older adults in the home are women.6 Because combining unpaid caregiving with paid work can be challenging, women are more likely to work part time or take time out of the workforce to care for family. 6Twenty-three percent of mothers are out of the workforce compared to just 1 percent of fathers. 6 Those career "gaps" can make a big difference in the amount of retirement funds that accumulate over time. The bottom line is that, although raising children and caring for a family is a tough job, women may end up working even harder later in life to make up for that time.

As husband and wife, Jake and Joanie learned that there was a lot they could do. For starters, they began talking about money - not his money or her money - but their money. They mapped out a retirement strategy that covered the whole range of "what if" scenarios: if he should die first, if she should die first, if they should divorce (yes, it needs to be addressed), if one became incapacitated, and so on.

What about you? If you're married, the two of you need to sit down and discuss your future and make sure you're both provided for. If you're single, you need to plan for yourself. Either way, talk to your pension administrator at work; max out your 401(k) contributions, as well as your IRAs.

Things You Can Do to Boost Your Retirement Security
If you're a woman, odds are high that your pension will be lower than that for the men you car pool with to work. So, whether you're just starting up the career ladder or a well-established veteran, you need to do more than just think about boosting your retirement security. Fortunately, there is a lot you can do.

  1. Make a conscious effort to take charge of your own retirement planning. Don't leave it to chance... or your husband. Start saving for retirement. No excuses.
  2. Get knowledgeable about finances. You don't need to become a Wall Street wizard. You can learn enough to make intelligent choices - or at least understand the advice of experts - by reading a few books or attending one of those weekend seminars. Investing a few hours learning the basics can pay big dividends in knowledge today, and financial security tomorrow.
  3. Make maximum contributions to qualified retirement plans through work and IRAs on your own.
  4. If you're single, don't wait for Mr. Right to come along and solve all your problems. Too many women torpedo their own financial security by deferring to their husbands - even the one they haven't met yet. Besides, even if he is Mr. Right, you will probably outlive him. Your best bet: Take charge of your own future.
  5. If you're married, take an active part in your household's finances. Become economic partners with your husband.
  6. If you're married, discuss the critical differences between joint and single life pension and annuity benefits. Under a single life option, when he dies, his benefits die with him. Also, since you probably will outlive him, make sure that your (his and yours) estate plan provides for you after he is gone.
  7. Look before you leap when changing jobs. Don't go solely for a bigger paycheck; make sure you won't lose retirement benefits. Also, you may want to think twice before retiring early - before your benefits are maxed out.
  8. Become financially aggressive. Historically, women have tended to be conservative with money. While this is changing, many women still tend to focus too much on protecting principal than on achieving solid returns.

Consider All Your Financial Choices
It's important to carefully evaluate all your financial options. There are a variety of products available that can suit any number of goals. By exploring your choices today, you can establish a sound financial strategy for your retirement years. It's important to factor in all your present and future needs, both financial and personal. This way you may help ensure that your "golden years" will be more carefree.

As you seek security for yourself and your loved ones, you want the best: a company with financial strength, with people committed to serving your needs, and with products that will help serve you well today - and tomorrow.

New York Life: The Company You Keep®
Since 1845, New York Life Insurance Company has been providing quality insurance products to individuals, families, and businesses. For over 160 years, we have conducted our business around the central values of financial strength, integrity, and humanity - and have remained committed to being a mutual company, owned solely by our policyholders. This means that, regardless of the economy, our focus is fixed on just one objective: meeting the needs of our customers, now and far into the future. Talk to your New York Life agent today and find out why we are The Company You Keep®.

1 BLS Spotlight on Statistics Older Workers, U.S. Bureau of Labor Statistics, July 2008

2 CRS compilation based on data from the US Census Bureau's International Data Base

3 Fact Sheet: Social Security Is Important to Women, Social Security Administration, October 2008

4 The Shriver Report: A Woman's Nation Changes Everything, Study by Maria Shriver and Center for American Progress, October 2009.

5 Ruth Helman, Craig Copeland, and Jack VanDerhei, "The 2009 Retirement Confidence Survey: Economy Drives Confidence to Record Lows; Many Looking to Work Longer," EBRI Issue Brief, no. 328, April 2009.

6 The Straight Facts on Women in Poverty, Center for American Progress, October 2008.

This material is being provided for informational purposes only. Neither EMA Financial and Insurance Services nor its agents provide legal, tax or accounting advice. Please contact your own advisors for legal, tax and accounting advice.


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