Women's Retirement Outlook...and 10 Steps to Improve it
I have written this article because the awareness of risk is an important factor in being able to address it. Also, it can be of comfort to those that face a situation or a challenge to know that they are not alone and that others share the same concerns.
Friendship is born at that moment when one man says to another: "What! You too? I thought that no one but myself . . ." - C. S. Lewis
I work with people that are approaching retirement. Retirees want security, this is not merely a function of financial assets, it is also a function of their relationship with their advisor, that is, they want an advisor to provide them with safe and wise advice about their retirement decisions. Retirement is about making smooth transitions and keeping options open so as to retain control when something unexpected happens.
As a result of surveying over five thousand American workers, in November 2019 the Transamerica Center for Retirement Studies (TCRS) published a fact sheet - Nineteen Facts About Women’s Retirement Outlook, - Select Findings from the 19th Annual Transamerica Retirement Survey of American Workers. Below is an extract of this fact sheet. Some of the topics revealed by this survey include - women have an expectation for an active retirement, how importance it is to protect long-term health in retirement, the expectation that there will be a need to work in retirement, the level of participation by women in retirement savings vehicles available to them, and also the use of a professional financial advisor to assist in their decision making. The report’s 19 facts about women’s retirement, detailed below, are followed by a list of proactive steps women can take to address the retirement risks they face - “Ten Ways Women Can Take Control of Their Retirement”.
These 19 facts to raise awareness of retirement risks that women face and highlight opportunities for them to improve their retirement outlook:
1. Only 12 percent of women are “very confident” that they will be able to retire with a comfortable lifestyle.
2. Women are dreaming of an active retirement, including traveling (67 percent), spending more time with family and friends (59 percent), pursuing hobbies (44 percent), volunteering (28 percent), and working (26 percent).
3. 55 percent of women expect to retire after age 65 or do not plan to retire.
4. 54 percent plan to work after they retire, either full-time (12 percent) or part-time (42 percent).
5. Among women who plan to work past age 65 and/or in retirement, more cite doing so for financial reasons (84 percent) than healthy-aging related reasons (69 percent).
6. Some women are not being proactive enough to work past age 65. Only 48 percent say they are staying healthy, 44 percent are focused on performing well at their current job, and only 39 percent are keeping their job skills up to date.
7. Slightly more than half of women are taking key steps to protect their long-term health, including eating healthfully (56 percent), exercising regularly, seeking medical attention when needed, and getting plenty of rest (all 53 percent).
8. 31 percent of women are or have been caregivers, and nearly all of them made some work-related adjustments as a result of caregiving, such as using vacation or sick days (38 percent) or missing work (36 percent).
9. Paying off debt is a financial priority for almost two-thirds of women (65 percent). Only 49 percent of women cite saving for retirement as a priority.
10. 32 percent of women expect Social Security to be their primary source of retirement income.
11. 68 percent are saving for retirement through a workplace plan and/or outside of work in an IRA, mutual fund, bank account, etc. Women started saving for retirement at age 27 (median).
12. 61 percent of women are offered a 401(k) or similar employee-funded retirement plan. However, 30 percent of women work part-time so are less likely to have workplace retirement benefits.
13. Among women who are offered a 401(k) or similar plan, 73 percent participate in the plan and they contribute 8 percent (median) of their salary to the plan.
14. Women’s total household retirement savings is $23,000 (estimated median).
15. Women believe that they will need to have saved $500,000 (median) in order to feel financially secure in retirement; among those who estimated their savings needs, 54 percent say they “guessed.”
16. Only 15 percent of women have a written retirement strategy, and 42 percent have an unwritten strategy.
17. 37 percent of women use a professional financial advisor to help manage their retirement savings and investments.
18. Just 29 percent of women are aware of the Saver’s Credit, a tax credit for saving for retirement.
19. Few women (14 percent) frequently discuss saving, investing, and planning for retirement with family and friends.
Ten Ways Women Can Take Control of Their Retirement
The good news is that small steps, when taken together, can add up to great strides in retirement preparedness. Retirement will be unique for each woman, but the tools to help achieve retirement readiness are common to all. No matter your age now is the time for every woman to focus on achieving a financially secure retirement.
Ten specific steps that women can take to improve their retirement readiness:
1. Create a budget that includes income, living expenses, paying off debt, and financial goals such as building short-term savings and long-term retirement savings.
2. Save for retirement and get into the habit of saving on a regular, consistent basis. Save as much as you can, knowing that both small and large amounts add up and compound over time.
3. If your employer offers a retirement plan, participate. Be sure to save enough to take full advantage of employer matching contributions, if available. Consider making catch-up contributions if you are age 50 or older.
4. Develop a retirement strategy and write it down. Envision your future and use an online calculator to estimate your long-term savings needs. Then formulate a goal for how much you will need to save each year – and hold yourself accountable for saving.
5. If faced with caregiving responsibilities for a parent, spouse or other loved one, carefully consider any changes to your work. To help mitigate the impact on your long-term financial security, explore options such as shifting to part-time work.
6. Maintain your ability to continue working as long as you desire. Keep your job skills up to date and learn new ones. Many employers, community colleges and nonprofits offer classes in the latest technologies and careers. Networking groups offer opportunities to meet more people in particular professions.
7. Become personally involved in your family finances ranging from daily budgeting to long-term planning. Discuss retirement saving and planning with family and close friends. An open dialogue with family members about expectations of needing to provide or receive financial support should be part of every woman’s retirement strategy.
8. Get educated about retirement investing and strategies for drawing down savings in retirement. Learn about types of retirement accounts, asset allocation, dollar-cost averaging and the risks of early withdrawals. Become knowledgeable about spending your savings in retirement, including the best time to start receiving Social Security and possible ways to make your savings last throughout your retirement. Seek professional assistance if needed.
9. Have a backup plan in the event of unforeseen circumstances such as separation, divorce, loss of a partner, or being unable to work before your planned retirement. Consider emergency savings; insurance products such as disability insurance and life insurance; and possible ways to cut costs if needed, such as moving to a smaller home, finding a roommate, scaling back transportation costs, or starting a “side gig.”
10. Safeguard your health to help make the most of your retirement. Make a habit of eating healthfully, exercising regularly, getting plenty of rest, and managing stress. Be sure to get routine physicals and recommended health screenings. Seek medical attention when needed.
This report provides a good overview of the risks being faced by women as they plan and approach retirement. We will all be taking the retirement route someday, remember, it’s never too late to make a plan for your retirement. At Boerum Hill Financial Advisors we want you to be able to retire with the confidence that you will have enough income to maintain your dignity and independence in retirement. To that end, if you are approaching or you are in retirement and do not feel confident or secure as you would wish, I would be happy to sit down with you and answer any questions you may have. Furthermore, if you have a Facebook account one of the best ways for this message to get to others is by simply “sharing” the post by using the Facebook icon below.