We know that statistically women outlive men. By age 85, there are approximately five women alive for every three men. By age 95, the ratio of women to men doubles. (Source: 2010 U.S. Census Bureau). We also know that income disparities over time can have significant implications on the amount women are able to save for retirement. Ultimately this means women need to fund a longer retirement with fewer financial resources.
To help frame the retirement income decisions women have to make when approaching retirement, use the following suggestions as general guidelines:
- Establishing a target age is important because when you retire will affect how much you need to save. For example, if you retire early at age 55 the number of years you have to save is lessened and the number of years that you will be living off retirement savings is longer.
- Medicare generally doesn’t start until you reach age 65. Retiring prior to eligibility for Medicare means you may have to look into COBRA or a private individual policy, which can be expensive.
- You can begin receiving your Social Security benefit as early as age 62. However, your benefit is then reduced 25% to 30% if you do not waiting to collect until full retirement age.
- Working part time during retirement will allow you to rely less on retirement savings in the beginning and you may also have access to affordable health care while waiting for Medicare.
- If you are married, and your spouse is still working too, it may pay to think about staggering retirements to ease the financial transition into retirement.
Creating a retirement income roadmap is a practical suggestion for managing and overcoming the unique challenges women face in retirement. Don't sit this one out. Join the discussion and learn along the way if necessary. A financial professional can help sort through the options to develop a plan that is right for you. One of my favorite quotes by Henry David Thoreau provides a timeless message for looking to the future; "Go confidently in the direction of your dreams. Live the life you have imagined."
Laurie Renchik, CFP® is a Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.
Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.
Information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.