retirement

Retirement Tips for a Long Lifetime

Women face all the financial challenges that men face—plus a longer life span.

My daughter Claire, who’s 34, recently sent me an e-mail recounting what she called “the saddest conversation between a mom and her daughter,” which Claire overheard while having lunch at a restaurant. The girl, who appeared to be about 12 years old, asked her mother how people pay for retirement. “Her mom said, ‘Well, there’s this thing called a pension, but that probably won’t be around when you’re older. And there’s Social Security, but that probably won’t be around, either.’ ”

“And that was it,” Claire wrote. “It made me sad because the mom clearly had no idea how one actually pays for retirement, and it was such a lackluster answer to a really good question. It seemed like a good time for her to tell her daughter that you need to save for retirement for your entire life.”

Claire is right on two counts: Lackluster answers won’t help girls become financially savvy, nor will they help women achieve a secure retirement.

I’ll weigh in on raising money-smart girls in another column. This month I’ll tackle the retirement question. “Women face all the issues that men face, plus they have additional complicating factors,” says Larry Swedroe, co-author with Kevin Grogan of Your Complete Guide to a Successful & Secure Retirement.

Those factors can be summed up in one word: longevity. Women statistically live longer than men in retirement, but they tend to amass less in retirement savings because they earn less over the course of their careers, are more likely to take time off for family responsibilities and tend to invest more conservatively.

Beyond basics. As Claire put it, the key to retirement is to “save for your entire life”—mainly by taking advantage of IRAs and 401(k) accounts and other workplace retirement plans so that you can invest steadily and not shy away from taking the kinds of calculated risks that will allow your nest egg to grow more quickly (see My Best Investment Advice).

In addition to that general advice, women should take advantage of specific retirement-planning strategies that fit their circumstances and stages of life. Besides funding a 401(k), for example, working women can “make sure we are negotiating salaries,” says Katie Keary, a certified financial planner with Buckingham Strategic Wealth in St. Louis. “We don’t ask for more, whereas men tend to do that.”

Women who leave the workforce temporarily don’t have to neglect retirement savings if they have a spousal IRA. Assuming your spouse is working, he (or she) can contribute up to $6,000 to a spousal IRA in 2019, or $7,000 if you’re 50 or older (see Keep Your Options Open as a Stay-at-Home Mom).

For women who are re-entering the workforce after an extended absence, catch-up contributions for those 50 and older can help make up for lost ground. In addition to the $1,000 bonus for IRAs, you can contribute an additional $6,000 to a 401(k) account in 2019, on top of the basic $19,000.

In the event that your marriage ends in divorce, your joint retirement savings may be your largest single asset. You aren’t automatically entitled to a share of your spouse’s plan, so make sure it’s on the table when you negotiate a settlement.

Remember that you have a right to receive a survivor benefit if your spouse is eligible for a traditional pension. That trims the monthly payout a little, but unless you’re likely to die before your spouse, it rarely makes sense to give up lifetime benefits. And if you are entitled to your own pension, gender-neutral calculations generally make it more advantageous for women to take a regular payout rather than a lump sum, if you’re offered that option (see Maximize Your Income in Retirement).

Because women have longer life expectancies than men, the annual 8% boost in Social Security payouts that you receive by waiting past full retirement age to claim benefits is particularly valuable for women. “The longer you can wait, the better,” says Keary. “Social Security is really longevity insurance for women.”

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
You Can Appeal a Medicare Premium Surcharge
Medicare

You Can Appeal a Medicare Premium Surcharge

If you meet one of the seven qualifying life events, you have a good chance of getting a higher premium for Medicare Part B and Part D reduced.
June 16, 2021
6 Things to Know About 529 Education Savings Plans

6 Things to Know About 529 Education Savings Plans

Sponsored Content by Capital Group
June 9, 2021

Recommended

7 of the Best Places to Retire
places to live

7 of the Best Places to Retire

These small cities check all the boxes for an affordable, active retirement.
June 24, 2021
33 States with No Estate Taxes or Inheritance Taxes
retirement

33 States with No Estate Taxes or Inheritance Taxes

Even with the federal exemption from death taxes raised, retirees should pay more attention to estate taxes and inheritance taxes levied by states.
June 23, 2021
Taxes in Retirement: How All 50 States Tax Retirees
Tax Breaks

Taxes in Retirement: How All 50 States Tax Retirees

We rated every state, plus Washington, D.C. on how retirees are taxed. We considered taxes on Social Security and other retirement income, tax exempti…
June 23, 2021
Business Owners Need an Exit Strategy When They Are Ready to Retire
small business

Business Owners Need an Exit Strategy When They Are Ready to Retire

If you are looking to sell your business and retire, you need to understand what your company is worth, what documents you must have ready and who the…
June 23, 2021