#PlanLikeaWoman: Retirement Planning for Women on Women's History Month

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#PlanLikeaWoman: Retirement Planning for Women on Women's History Month

As you may or may not know, March is Women’s History Month, and with that comes the need to ensure your advisor – male or female – is open to educating you on financial matters. Here’s how to take the retirement reins and bring your financial planning to the next level.

Women’s History month was designated by the U.S. Congress in 1987 to acknowledge and celebrate the achievements of American women.

Over the past 31 years – women have played a critical role in advancing our country and being able to reach new heights as a society.

Sadly, women often face special challenges when planning for retirement. But it’s not all doom and gloom. Here’s what you need to know about retirement planning in light of National Women’s History Month. 

Let’s start by addressing the elephant in the room. More than half of women are not saving for retirement. If you are among them, know that saving in an employer’s retirement plan is the most effective way to save for your future. 

Oftentimes if you’re still in the workforce, your employer should offer a matching contribution – that’s free money! A workplace plan is the easiest way to save, so take advantage when you can. Employer-sponsored plans take different forms, but they fit primarily into two categories:

  • Defined benefit plans, which promise workers a specific amount of retirement income.
  • Defined contribution plans, which don’t guarantee any retirement income but instead allow workers to save for their own retirement, often with some employer assistance.

Noticeably, the most common Retirement plan that many sign up for is the 401(k) plan. A 401(k) Plan is a defined contribution plan that is a cash or deferred arrangement. Employees can elect to defer receiving a portion of their salary which is instead contributed on their behalf, before taxes, to the 401(k) plan. Sometimes the employer may match these contributions. 

There is a dollar limit on the amount an employee may elect to defer each year. An employer must advise employees of any limits that may apply. Employees who participate in 401(k) plans assume responsibility for their retirement income by contributing part of their salary and, in many instances, by directing their own investments.

Women are traditionally more likely than men to have taken time out of the workforce. Giving birth and raising children are common reasons. Additionally, women are more likely than men to take time off work to serve as caregivers to family members such as aging parents.

On average, a 65-year-old woman can expect to live to age 86. That’s 21 years in retirement, and nearly 3 years longer than men. This makes it extra important for women to build a sufficient retirement nest egg for themselves. 

What’s more, most women don’t take advantage of the stock market, or they shy away from investing. Unfortunately, some negative stereotypes still exist about a woman’s ability to manage money, which may cause some women to feel they shouldn’t make their own investment choices. Despite the stereotypes, studies show that the majority of married women actively participate or take the leading role in managing family finances.

If you’re unfamiliar with common investment terms such as diversification, asset allocation, and compounding, you can broaden your knowledge with a simple search on our website where we cover these topics in detail. And remember, you don’t have to do it by yourself — our advisors will be happy to work with you to set retirement goals and help you choose appropriate investments. Aside from any decisions you may need to make about drawing on your investments for income, you’ll also want to discuss how your money is invested and make some changes along the way.

For all these reasons and more, women typically are retired for a longer period of time than men and with fewer assets. So start small if you must, but start saving now! Begin with a realistic assessment of how much you’ll need to save. An online retirement savings goal-setting calculator can help. If the figure is substantial, don’t be discouraged — the most important thing is to begin saving now. 

Some people may only need 75%-80% of their pre-retirement income to cover all their retirement costs; once they retire, but that’s not the case for everyone. If you have big plans for retirement you may need more each year than you do now. 

Don’t forget, Social Security benefits are only intended to replace around 40% of pre-retirement income, meaning the majority of your income in retirement will need to come from your personal savings. To get an estimate of what you’ll need to save, establish a retirement budget and be honest with yourself about what you expect to spend. The more accurate your estimate is, the more prepared you’ll be.

Retirement planning is a long game. Knowing how much you’ll need for retirement, your strategy for drawing down your 401(k) or IRA, how to invest and balance your portfolio, and how you and your partner can work together to reach your goals are all things to keep in mind.

As a woman, there are more obstacles on the path to retirement. But by saving and developing a sound plan, you can overcome those obstacles and take control of your financial future.

At CKS Summit Group, our focus is to bring you fresh new ideas for your retirement income. Our cutting edge tactical portfolios help our clients achieve safe, healthy growth of their savings and preservation of their principal balance.

Come and experience the new evolution of retirement income planning. Click here to set up your complimentary strategy session today.