Retirement planning can be daunting for anyone but more so for women. Typically, women live longer than men yet through wage disparity and taking time off to care for children or family members, they usually have less money to fund their additional years.
Women are also more likely to work part-time jobs with no access to retirement plans.
“People are much more likely to save for retirement if they have retirement benefits at work, a 401K plan for example,” said Jean Setzfand, AARP Senior Vice President for Programs. “Very few people even have access to a traditional pension plan. Roughly about half of us have access to some form of retirement benefit plan and most of them are high contribution, 401Ks. …Those are all factors that add up to far less money saved.”
With less money saved, many may be tempted to tap into social security benefits when they become available at age 62. Setzfand encourages women to wait.
“Try as hard as you can to not claim as early as possible,” she said. “The longer you wait to tap into that benefit, the higher that base amount and that is important because once you claim your social security benefit, you, in essence, lock in that benefit for the rest of your life and it is one of the few components of your retirement savings that is a guarantee. That foundation — you want it to be as large as possible.”
If able, Setzfand suggests working as long as possible. “I know that is not the most positive or uplifting action to take if you are in a labor intensive job but what are ways you can try to extend those income earning years as long as possible,” she said. Women may explore whether hobbies they enjoy could be turned into income generation or looking at monetizing their full skill set beyond what they are currently doing from a professional standpoint. By working longer, “the greater position you will be in to actually save for retirement as well.”
Zaneilia Harris, Harris and Harris Wealth Management Group LLC president, notes there are three areas women should consider when planning for retirement — cash flow, taxes and incapacity.
“They need to determine how much money they will need and can expect on a monthly basis to support their retirement lifestyle,” she said. “They need to know how all of their different retirement accounts will be taxed so they can have an income withdrawal strategy that helps to minimize taxes and provide them with the most income. Since women can live longer than men, they need to have a plan that provides detail actions so that financial decisions can be made when they are physically unable to on their own.”
When planning for retirement, Harris believes women should put together a personal advisory team to include their doctor, financial planner, CPA and estate attorney.
“They should all work together to help you achieve your goals, both personal and financial,” she said. “Most women don’t look at their doctor like a key component of your team but they are. …Your doctor is just as important to your finances as everything else. If you don’t take care of yourself, your health bills, insurance (and health) issues go up. You are spending more of your retirement taking care of your health than enjoying it.”
So how do women balance being fiscally prudent with their retirement funds while also being able to enjoy their golden years?
“When you think about retirement, actually think about the life that you want first rather than the money,” Setzfand said. “Retirement planning always leaps to that dollars and cents aspect of it, but if you have a clear view of what you actually want to do in retirement, once you start to think about that in a very tangible form, you should have your life and life goals drive the money that you need.”
If you plan on living in a different area, price the location out and see what the cost of living would be so you can get a better sense of your budget. “This brings the future into the present,” Setzfand said.
As a certified financial planner, Harris’s job is to understand her clients’ life goals then connecting their money to those goals.
“By painting a picture of what life looks like factoring different scenarios, it helps women to see what’s important to them and make money decisions around that,” she said. “My goal is not about telling them what they can or cannot spend on but about guiding women with positive discussions towards the decisions that helps them keep what’s important front of mind. This is having a money plan around their life and the things that matter most to them. That tends to keep clients focused on what’s of value to them.”