Your Money, Your Life: What women need to know about retirement

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February 17, 2009

Your Money, Your Life

Many women worry about how they will cover their expenses after they are retired. It is a realistic concern. At age 65, women can expect to live another 20.3 years on average, according to the National Vital Statistics Report. Many will live into their 90s, thus women should plan for a retirement that will last 20 or 30 years. That's a long time without a paycheck!

Women should also consider the possibility of spending some years alone. According to recent statistics, 43 percent of older women are widowed, and 11 percent are divorced. Approximately half of women over age 75 live alone.

If you are currently married, consider how your income would be affected by the loss of your spouse. Will you have a decrease in Social Security and/or pension income if your spouse dies?

Women give me many reasons why they are not actively planning for their retirement. Here are a few of the more common ones:

"I am too busy." It is difficult to balance all of the responsibilities of your home, job, and family. But if you don't put planning at the top of your to-do list, you are putting yourself at risk. Staying focused on your long-term goal may be difficult, but if you make it a priority, you will eventually be glad you did.

"My husband takes care of the money." It is essential that you take an active role in planning for retirement; otherwise you may be forced to make important decisions during a period of crisis, without enough information. Mistakes can be costly.

"I'll save after my children finish college." This is a mistake many well-intentioned parents make. But while children have options for financing college (such as loans, grants, and scholarships), you can't take a retirement loan.

"I don't know enough about investing." If you spend a few minutes a day studying the basics, you will learn quickly. If you really don't want to do it yourself, seek out a knowledgeable professional to help you.

The process comes down to a few simple steps. First, estimate how much income you will need, using your current expenses as a starting point. Then subtract expenses that will stop when you retire, such as mortgage expenses (if you plan to pay off your house), and child-related expenses. Add expenses that may increase, such as money for travel and hobbies.

Next, figure out how much you will receive from Social Security and pension plans. If this is not enough to cover your cash flow after retiring, calculate the amount of the shortfall so you can develop a savings target. It is a good idea to check your assumptions with a financial planner, because inflation and potential health care expenses can have a major impact on the result.

Finally, save as much as you can each month toward your retirement savings goal. Most people do best by setting up an automatic savings plan and then increasing the amount saved when they receive a gift, bonus, or tax refund. Review your plan regularly, and celebrate your progress!

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Dianne Webster is a registered investment adviser with Integrated Financial Strategies, LLC of Amesbury. Questions to be considered for future personal finance articles may be sent via e-mail to dwebster@ifslegacy.com.