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Securian Financial

Special retirement considerations for women

How living longer and caring for others can impact retirement savings

Many of us imagine spending our golden years making memories with our loved ones. For some, that might include traveling to bucket-list destinations with family, going to midweek matinees with friends, or making frequent trips to the dog park with our furry pal. And, if you’re a woman, you can plan on having these experiences for a few more years than your average Joe.

It’s no question that statistically women outlive men. On average, American men live to age 76 and American women live to age 81.1 Also, a woman who reaches the age of 65 has a 50 percent chance of living to age 91, and a 25 percent chance of living to 96.

Those extra years after retirement can be a blessing, but can also make a dent in your finances. Simply put, the longer you live, the more money you need.

On top of living longer, women tend to have additional special circumstances during their working years. Some take time off of work to care for young children, or an older parent or relative. Both situations can throw any well-intentioned financial plan off course.

Here are a few things to consider to help you stay on track so your retirement can be spent doing what you want– instead of worrying about money.

Prioritize your savings

It’s only natural to want to treat yourself to that extra-hot cappuccino, made-in-Italy handbag, or trip to Turin. And there’s nothing wrong with these “treats” — as long as you can pay for them without risking your retirement savings.

That means sticking to a budget and putting as much money away for retirement as you can. If you’re nearing retirement, make it a goal to contribute 15 percent (or more) of your earnings to savings.

Take advantage of employer-sponsored retirement plans

Experts also recommend maxing out your employer-sponsored 401(k), if possible. In 2020, the IRS allows you to contribute up to $19,500 to your 401(k). If you’re 50 or older, you can contribute up to $26,000. Those savings will grow tax-deferred and fund a big portion of your retirement. Also, if your employer matches your 401(k), be sure to take advantage of this benefit.2

Consider setting aside additional money

Want to supplement your 401(k) with an IRA? In 2020, the IRS allows you to contribute up to $6,000, or $7,000 (if you’re age 50 or older) in total to all of your traditional and Roth IRAs.3

Keep in mind: With a Roth IRA, whatever contributions have been in your account for five years or longer are available to you tax-free when you’re age 59 ½ or older.

Think about your health

Living longer can mean you have more health care expenses throughout your retirement.

As you age, you can expect to experience more health-related issues during your post-work years. However, many retirees are surprised at just how much money they spend on health and long-term care costs – in fact, 40 percent spend more money than they had anticipated. Some studies estimate that retired couples need anywhere between $200,000 to $500,000 to cover their health care costs.

Be proactive with your health — and savings

Because health care costs are rising at a faster rate than inflation (which trends toward 3 percent), it’s a good idea to be proactive.

First, take care of yourself and stay mentally and physically healthy now so that you enter retirement feeling good. That means saying “yes” to more fruits and vegetables and regular exercise, as well as engaging with loved ones and participating in hobbies you enjoy.

Of course, some illnesses can’t be prevented. That’s a good reason to look into insurance with long-term care benefits, which can help cover costs that are associated with assisted living and in-home care. People who are 65 years old have a 50 percent chance of needing some sort of long-term care someday.4

However, you’ll typically get it at a better price if you purchase it in your 50s or early 60s, as insurance gets more pricey with each passing year. Recently, initial premiums were 8 to 10 percent higher for people age 65 versus age 64.4

The bottom line is that health care is expensive — so be sure to factor in these costs in your retirement budget and be aggressive how much you save for it.

Work with a professional

Making sure you have enough money in retirement can seem overwhelming — especially when people are living longer than the previous generation and need their savings to last 10, 20, or even 30 (or more) years.

Thankfully, financial professionals can help you come up with a plan so you don’t outlive your money.

They might have you consider looking into a tax-deferred annuity, which can complement the income you'll receive from a 401(k) or other defined contribution plan, a pension (if you’re so lucky to have one) and Social Security.

Annuities can provide a guaranteed stream of income in retirement. Another plus? You can put away as much money as you want into an annuity (there isn’t an annual contribution limit), allowing you to play catch-up if you find yourself coming up short as you near retirement.

Pre-tax vs. post-tax considerations

Of course, retirement doesn’t allow you to get off tax-free. That’s why a financial professional might suggest you choose both pre- and post-tax savings vehicles.

Your 401(k) is the former, and you pay taxes when you withdraw money at a later date. A Roth IRA is the latter, and you pay taxes on the money right away and withdraw it tax-free later (provided it's a qualified distribution).

Get familiar with Social Security

Social Security in the United States dates back to 1935. Since then it’s grown to be an important piece of the retirement puzzle.

Providing a guaranteed income for life, cost-of-living adjustments (COLA) to offset inflation, and spousal and survival benefits, Social Security affects millions of Americans’ retirement incomes.

Women make up more than half of the Social Security beneficiaries. The average monthly benefit for retirees is $1,471.5

How Social Security works

Your primary insurance amount (PIA) is your monthly benefit amount, and it’s determined by how much money you (or your spouse) earned while working. You can maximize your PIA by evaluating when you’d like to start receiving Social Security benefits.

Depending on the year you were born, you’re entitled to start receiving your full benefits between the ages of 65 and 67. For example, if you were born in 1960 or later, you reach your full retirement age (FRA) when you’re 67.

However, you can claim your benefits earlier (age 62) or later (age 70). Collecting early can decrease your monthly benefit up to 30 percent. Collecting later can increase your monthly benefit by up to 8 percent.

What you decide to do will depend on whether you prefer receiving more payments at a lesser amount or fewer payments at a greater amount. Your monetary needs and life expectancy play a role in deciding when to make your claim. Your financial professional can help you decide the best course for you.

Communicate about your plans

It’s important that you talk openly with your family about what a successful retirement looks like to you. After you implement a smart strategy to make it happen, be determined to stay on track. Your future (retired) self will thank you.

Want more retirement preparation tips?

Visit the retirement section of our Insights & Tools library.    

Read articles

1. Heid, Markham. “Why Do Women Live Longer Than Men?” Time.com, February 27, 2019.

2. Hartman, Rachel. “Should You Max Out Your 401(k)?” U.S. News, January 29, 2020.

3. Retirement Topics - IRA Contribution Limits. IRS.gov, February 7, 2020.

4. Stark, Ellen. “5 Things You SHOULD Know About Long-Term Care Insurance.” AARP Bulletin, March 1, 2018.

5. Brandon, Emily. “What Is the Maximum Possible Social Security Benefit in 2019?” U.S. News & World Report, August 5, 2019.

An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Please consult a tax advisor for specific information. There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals.

Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender periods. Additional benefits may require an additional agreement. Agreements may be subject to additional costs and restrictions and may not be available in all states or may exists under a different name in various states.

Product availability and features may vary by state.

Guarantees are subject to the financial strength and claims paying ability of the issuing insurance company.

This information is a general discussion of the relevant federal tax laws provided to promote ideas that may benefit a taxpayer. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. Taxpayers should seek the advice of their own advisors regarding any tax and legal issues specific to their situation.

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