Women can address their greatest single financial fear - running out of money in retirement - with financial planning strategies aimed at retirement security.
Both men and women say running out of money in retirement is their biggest financial fear, but the concern ranks higher for women than men, 46 percent vs. 41 percent, respectively, according to a Millionaire Corner study of 1,400 investors conducted in May. And, while both women and men say their biggest financial regret is not saving enough for retirement, a higher percentage of women than men express this regret, 19 percent vs. 16 percent, respectively. These heightened concerns appear to reflect a financial vulnerability particular to women and the need for specific financial planning strategies.
Women can expect to live longer than men, according to a briefing from the U.S. Department of Labor, which reports that the average American woman who retires at 65 is likely to live another 19 years, compared to 16 years for the average man. Yet, women are more likely to work in part-time jobs without retirement benefits, and also have a higher tendency to pause their careers to raise children or take care of older family members. As a result, women work fewer years and contribute less to retirement. Exacerbating this retirement deficit is the tendency for women to follow more conservative financial planning strategies than men do, said the Labor Department. (Millionaire Corner research shows men feel much more confident than women about their investment abilities.)
What can a woman do to increase her retirement security? Saving is key among financial planning strategies for retirement, according to the Labor Department. “Remember, by saving early you have time on your side,” said the Labor Department. “Your savings will grow and your earnings will compound over time.”
An employer-sponsored defined contribution plan, such as a 401(k), offers tax-sheltered growth of retirement investments and can be a powerful savings vehicle. Many 401(k) plans feature matching employer contributions than can help boost retirement savings and, according to the Labor Department, “That’s like getting free money! If your employer offers a retirement plan, join it as soon as you can and contribute as much as the plan allows.”
Workers who don’t have access to an employer-sponsored plan can still enjoy tax-advantaged retirement savings through an Individual Retirement Account. “Anyone receiving compensation or married to someone receiving compensation can contribute to an IRA,” says the Labor Department. “In addition, if you are self-employed, you can start a Simplified Employment Plan (SEP) or a Savings Incentive Match Plan for Employees of Small Employers (SIMPLE).”
Comprehensive financial planning strategies for retirement will also include a calculation of anticipated Social Security income, earned by increasing numbers of women paying Social Security taxes, according to the Labor Department. Women may also be eligible for survivors’ benefits through a spouse’s Social Security earnings, and may also be a beneficiary of a spouse’s 401(k) or pension plan. When a marriage dissolves, a woman may be able to obtain rights to a portion of an ex-spouse’s benefits as part of a divorce or legal separation, said the Labor Department, so these spousal benefits can be an important input for financial planning strategies for women and retirement.