The retirement income needs for women are similar to those that apply to men; however, there are some factors that make it more challenging for some women to achieve their retirement planning goals and objectives, particularly in the area of finance.
SEE: Retirement Planning
Longer Life Expectancies
While living longer is definitely a plus for many individuals, it adds to the risk of outliving one's retirement savings. This is of a greater concern for women, who statistically live longer than men. According to a report by the National Center for Health Statistics, the life expectancy at birth for a man is 75 years, whereas it is 80.9 years for women. The same report indicates that the life expectancy for men at age 65, which is a generally accepted retirement age, is 17.6 years for men and 20.3 for women.
A three to four year difference in life expectancy may not seem like much, but when the cost of medical expenses during retirement is considered, along with other living expenses, the cost of living for a few years can be relatively high. According to a recent Fidelity report, "A 65-year-old couple retiring in 2012 is estimated to need $240,000 to cover medical expenses throughout retirement," if they are not covered by an employer medical coverage plan.
Women can manage these and other retirement living expenses by planning ahead and implementing practical solutions to saving for retirement.
Determine How Much Is Needed to Finance Your Retirement
While there are no guarantees on how long you will live. Your health status and the lifestyle that you will actually live during retirement can be used to make reasonable assumptions about how much you will need to finance your retirement years. Ideally, you should work with a financial advisor who is able to prepare a comprehensive analysis, which takes into consideration factors such as:
- Your life expectancy: This is usually based on factors which include your age, health status, life-style and medical history, as well as that of your parents.
- Your planned retirement lifestyle: This includes where you plan to live and the cost of living in that area, the type of home in which you want to live and your planned activities.
- Your need for medical coverage and longterm care: If you are not eligible for Medicaid and may need longterm care, your financial advisor can help you determine if you may need to purchase longterm care insurance to help cover the cost of any longterm care needs;
- Your sources of retirement income: This includes pension payments, social security and your personal retirement savings;
- Whether your retirement expenses and income will be shared: If you have a spouse or partner, your retirement planning goals and objectives should include that person's retirement planning profile, and where necessary, compromises should be made;
- Your accumulated and projected savings: This includes the tax-deferred nature of your savings and whether withdrawals will be subject to income tax and
- Your current and projected future tax rate: This will help to determine the net amount you could receive from your accumulated savings.
These and other factors that affect the financial aspect of your planned retirement will help determine how much you will need to save.
Determine How Much You Can Save
Ideally, you want to save the amount needed to ensure that you meet your retirement savings goal. However, from a practical perspective, the amount that you can afford to add to your retirement nest egg should be limited to what you can afford.
Assume that you are 30 years old, you plan to retire at age 65 and your financial advisor projects that you will need $1 million, in addition to what you have already saved, to finance your retirement. Assuming a rate of return of 4% and an inflation rate of 3.1%, you will need to save about $1,100 per month in order to reach your goal.
However, the question becomes whether you can afford to save $1,100 per month. If you find that saving $1,100 per month causes financial challenges, including causing you to increase your amount of debt, it may be practical to reduce your savings amount and/or revise your retirement goals and objectives.
The Bottom Line
When it is time for you to retire, additional financial analysis should be done to help ensure that you do not outlive your retirement savings. If necessary, modifications should be made to that end. This can include continuing to work if necessary, even on a part time basis, postponing your retirement date and investing in financial products that provide guaranteed income for as long as you live. Planning for retirement is not a 'do it yourself job' for amateurs. If you are not an expert in the area, and/or have the time to do the required research, consider engaging the services of a competent financial advisor.
RetirementLearn how much it costs to retire comfortably in Panama, and why it has become one of the most popular retirement destinations in the world.
RetirementDiscover why the Dallas/Fort Worth area of Texas is a popular retirement destination, and five of the best retirement communities in the area.
Stock AnalysisThese three stocks are resilient, fundamentally sound and also pay generous dividends.
ProfessionalsParents can both protect their retirement money and help their adult kids. Here's how.
RetirementIt's not too late to start saving for your retirement, even if you took longer to start thinking about it and doing something about it.
RetirementRetirement is going to cost a lot, and for homeowners who face a shortfall, their home can be a source of income. From downsizing to renting, here's how.
InvestingSavings is as crucial as ever, as we deal with life changes and our needs for the future. Here are some essential steps to get started, now.
Mutual Funds & ETFsFind out what kinds of mutual funds are unsuitable for millennial investors, especially when included in millennial retirement accounts.
RetirementMany people think 70% will be enough to support them in retirement, but they forget a few significant expenses that could lurk in the future.
RetirementRobo-advisors can add a layer of affordable help and insight to most people's portfolio management efforts, especially as the market continues to mature.
There are two broad categories of annuity: fixed and variable. These categories refer to the manner in which the investment ... Read Full Answer >>
Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
If you decide your current annuity is not for you, there is nothing stopping you from transferring your investment to a new ... Read Full Answer >>
A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
Continuing care retirement communities (CCRCs) can be accredited through the Commission on Accreditation of Rehabilitation ... Read Full Answer >>
Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>