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The Two Biggest Retirement Challenges for Women

Feb. 7, 2014
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By Lisa Hay

Learn more about Lisa on NerdWallet’s Ask an Advisor

Retirement planning presents major challenges for women. In assisting clients with planning for retirement, I have observed two main challenges for women.  Either of these challenges can either derail you from saving enough or drain your resources during retirement.

Longer lifespans

The average lifespan for women is 8 percent longer than that of a man, which means that a sound retirement saving and planning strategy is essential.

According to a study conducted by MetLife, most women expect to retire at the same age as men.  Therefore, on average, women need more money to sustain retirement than a man of the same age. Even a few years difference can make a considerable difference in the savings required to sustain retirement.

With this in mind, it is extremely important to save as much money as possible to ensure that you don’t run out of money if you live longer than expected. You can also help counter this threat by working with a savvy, experienced financial advisor who can create a realistic retirement savings and distribution plan that will show you how much you need to save to achieve a certain level of spending in retirement. Even if retirement is years off, it is never too early to start.

Caring for aging parents

A woman who is the primary caregiver, or even part-time caregiver, for her parents may have to either quit her job or cut back on her hours and/or spend money on their care that otherwise would be earmarked for retirement.

Because many women end up taking care of aging parents, the role of women as a caregiver has the potential to negatively impact both their wage earning capacity and their ability to plan and save for retirement.

Meeting the Challenges in Preparing for Retirement

In order to meet these challenges, there are a number of steps you can take, including:

  • Cut down on debt: Entering retirement debt-free is a great gift. If you have credit card debt, start by reducing that debt, then move on to other types of debt. When you pay off debt, cash can be freed up to invest wisely for the future, save prudently and provide for the future.
  • Make a list of goals: By having goals to aim for, it’s easier to commit to a savings and investment plan to support those goals. Your goals can always be changed and adjusted based on various circumstances, but by setting the goals it is easier to move forward.
  • Start or ramp up your savings rate: Set a goal of saving between 10-15 percent (or even more if you are closer to retirement and have not been saving over a lifetime) of your income each year.
  • Contribute the maximum to retirement plans: By contributing the maximum amount possible to retirement savings plans, you position yourself to continually grow the value of your retirement plans. This is especially important with 401(k) plans, where many employers match savings. Employer matches are the equivalent of free money that you don’t want to miss out on.
  • Consider inflation: Your retirement plan should incorporate inflation. Health care inflation is still significantly higher than average inflation. In addition, changes coming due to health care reform have increased uncertainty about how much health care costs will increase in the future once Obamacare is fully implemented.
  • Decide when to take Social Security: The decision about when to take Social Security is an important one. By putting off tapping Social Security benefits for even a few years, the ultimate monthly benefit will be larger. If you’re planning to continue to work into your mid- and even late 60s and can afford to wait, it makes sense to postpone taking your benefit.
  • Hire a fee-only financial planner: Even the most financially savvy woman can use an objective financial planner on her side to craft a comprehensive savings, investing and retirement plan for the future.

With two out of five women expected to live into their 90s, prudent retirement planning is an absolute necessity. There is so much involved in saving and planning for retirement that it can seem overwhelming. But with the help of careful planning and an experienced and objective financial advisor, you can work to put yourself in a strong position to experience the financial freedom to focus on what matters most and enjoy your retirement.