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Retirement planning for women

By Barbara Whelehan ·
Friday, April 15, 2011
Posted: 3 pm ET

We are in the middle of National Financial Literacy Month and at the end of National Retirement Planning Week. That makes it a great time to take stock of your progress.

This holds true for everyone, but especially for women.

Why's that? Women are often at a disadvantage compared to their male counterparts. They tend to drop out of the workforce for long periods of time, whether to care for children or elderly parents. They typically earn less than men -- though that's not always true. They sometimes get dumped by their husbands, who fall for younger women. Worse, they often become widows. And they tend to live longer, which makes retirement planning for women essential.

Women often end up alone

"Realize that at some point in your retirement life, you could very well be the sole income provider," says Certified Financial Planner Carole Peck, president of Carole Peck Financial Center, which has offices in Park Ridge, Ill., and in Bonita Springs, Fla. "Relying on someone else, or their income for your retirement, is a risky strategy."

I asked Carole how much a woman needs to have saved if she requires an income of $30,000 per year during retirement, in addition to Social Security. Let's suppose she expects to live for 30 years in retirement, during which her investments generate an annualized return of 5 percent and inflation averages 3 percent a year.

"For a woman age 65 with all of her savings in retirement accounts, she would need close to $1 million to maintain her lifestyle throughout retirement," Peck says. "In 30 years, what $30,000 buys today, will require around $70,000."

Inflation is one of the biggest forces that can derail a person's retirement, she adds.

But if this woman had half of her assets in retirement accounts and half in tax-free investments such as municipal bonds or a Roth IRA, she'd need about $900,000, or 10 percent less, because taxes play a big role in the equation.

10-year timeline

Let's face it, most Americans don't have that kind of money stashed in their retirement accounts -- or anywhere else, for that matter. What if she's not even close and she's facing retirement in 10 years? What are her options?

"Having 10 years to plan is an advantage," says Peck.

Peck says this woman can beef up her retirement plans, such as a 401(k), IRA and Roth IRA. She can focus on reducing major expenses such as housing, credit card interest and insurance costs. "Everything should be on the table and reviewed, including her career path and employment," says Peck. Is there a way she can improve her career by taking courses and adding to her skill set, for example?

Help is everywhere

Fortunately, you have a lot of resources you can tap to assess your situation. If you're not the do-it-yourself type, you can hire a financial adviser to help you out. But it would be worthwhile to do a self-assessment first.

The Department of Labor has a special page devoted to women and retirement savings that features eight questions to get you thinking about this crucially important topic. Near the bottom of that Web page are several links to other booklets, articles and websites to help you gather information. The online version of the DOL's booklet, Taking The Mystery Out Of Retirement Planning, offers interactive work sheets that can be completed at the end of each chapter, designed for those between ages 50 and 70. You can register and return to the worksheets and change inputs at your convenience.

Filling out the work sheets requires time, but it's time well spent. After all, at some point in the future, you'll end up with a lot more time on your hands. But you don't want to end up short of money.


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April 18, 2011 at 6:10 pm

Honestly. She would need more like $400,000. Over the thirty years that would produce the near million she would need.

Your Own Retirement
April 18, 2011 at 12:53 pm

The retirement process can be very daunting when someone starts to really dive into it head first. So many different factors that come into play and being a women has its own set of factors during retirement.