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Women and Retirement Planning

| May 19, 2019
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Women often face special challenges when planning for retirement. Because their careers may be interrupted more often to care for children or elderly parents, women may spend less time in the workforce and earn less money than men in the same age group. As a result, their retirement plan balances, Social Security benefits, and pension benefits are often lower. In addition to earning less, women generally live longer than men, and they may face having to stretch limited retirement savings and benefits over many years.

To meet these financial challenges, women need to make retirement planning a priority. Consider the following tips to help yourself or the women in your life plan ahead.

Begin saving now

To help improve your chances of achieving a financially comfortable retirement, start with a realistic assessment of how much you'll need to save. If the figure is substantial, don't be discouraged — the most important thing to consider is to begin saving now.

Although it's never too late to save for retirement, the sooner you start, the more time your investments have to potentially grow. The chart below shows how just $2,000 invested annually at a 6% rate of return might grow over time:

Note: This is a hypothetical example of mathematical principles, is used for illustrative purposes only, and does not reflect the performance of any specific investment. Results assume reinvestment of all earnings. Fees, expenses, and taxes are not considered and would reduce the performance shown if they were included. Actual results will vary.

Save as much as you can — you have many options

If your employer offers a retirement savings plan, such as a 401(k) or a 403(b), consider enrolling as soon as possible and contribute as much as you can. It's easy to save because your contributions are deducted directly from your pay, and some employers will even match a portion of what you contribute. If your employer offers a pension plan, find out how many years you'll need to work for the company before you're vested in, or own, your pension benefits. Women struggling to balance work and family sometimes shortchange their retirement savings by leaving their jobs before they become vested in their pension benefits. Keep in mind, too, that because your pension benefits will be based on your earnings and on your years of service, the longer you stay with one employer, the higher your pension is likely to be. Most employer-sponsored plans allow you to choose from several investment options (typically mutual funds). If you have many years to invest or you're trying to make up for lost time, you may want to consider growth-oriented investments such as stocks and stock funds. Historically, stocks have outperformed bonds and short-term instruments over the long term, although past performance is no guarantee of future results. However, along with potentially higher returns, stocks carry more risk than less volatile investments. A good way to get detailedinformation about a mutual fund you're considering isto read the fund's prospectus, which can be obtainedfrom the fund company. It includes information aboutthe fund's objectives, expenses, risks, and pastreturns. A financial professional can also help you evaluate your retirement plan options.*

 

Save for retirement — no matter what

Even if you're staying at home to raise your family, you can — and should — continue to save for retirement. If you're married and file your income taxes jointly, and otherwise qualify, you may open and contribute to a traditional or Roth IRA as long as your spouse has enough earned income to cover the contributions. Both types of IRAs allow you to make contributions of up to $5,500 in 2018 (unchanged from 2017), or, if less, 100% of taxable compensation. If you're age 50 or older, you're allowed to contribute even more — up to $6,500 in 2018 (unchanged from 2017).

 

Plan for income in retirement

Do you worry about outliving your retirement income? Unfortunately, that's a realistic concern for many women. At age 65, women can expect to live, on average, an additional 20.6 years.1 In addition, many women will live into their 90s. This means that women should generally plan for a retirement that will last at least 20 to 30 years. Women should also consider the possibility of spending some of those years alone. According to recent statistics, 34% of older women are widowed, 16% are divorced, and almost half of all women age 75 and older live alone.2 For married women, the loss of a spouse can mean a significant decrease in retirement income from Social Security or pensions. So what can you do to help ensure you'll have enough income to last throughout retirement? Here are some tips:

  • Estimate how much income you'll need. Use your current expenses as a starting point, but note that your expenses may change by the time you retire.
  • Find out how much you can expect to receive from Social Security, pension plans, and other sources. What benefits will you receive should you become widowed or divorced?
  • Set a retirement savings goal that you can work toward, and keep track of your progress.
  • Save regularly, save as much as you can, and then look for ways to save more — dedicate a portion of every raise, bonus, cash gift, or tax refund to your retirement savings.

Are you looking forward to retirement? Are you really prepared for what lies ahead?

Our free ebook can help you find out. Register today to receive your copy of "Retire Happy: A Simple Guide to Your Next Big Adventure."

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

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