Are You Facing A Retirement Income Shortfall?
According to a study by TransAmerica women are far less confident of their ability to retire with a comfortable lifestyle. The same study shows that most women are planning to retire at 65, or not at all, continuing to work into their retirement years.
There are many reasons why women, on average, are more likely than men to face a retirement income shortfall:
- Women's careers are often interrupted to care for children or elderly parents.
- They may spend less time in the workforce, and are more likely to work part-time.
- As a result their retirement plan balances and Social Security benefits are often smaller.
- Women tend to start saving later in life and invest more cautiously than men, which compounds the problem.
And because women tend to live longer than men, their retirement assets may need to last longer. Another interesting fact is that women on average are guessing at their retirement needs, rather than using a calculator to determine how much exactly they’ll need.
Save more, spend less now
Save as much as you can. Take advantage of IRAs, employer plans like 401(k)s, and annuities, where investment earnings can potentially grow tax deferred (or, in the case of Roth accounts, tax free). Utilize special "catch-up" rules that let you make contributions over and above the normal limits once you've reached age 50. If your employer matches your contributions, try to contribute at least as much as necessary to get the maximum match--it's free money.
One way of dealing with a projected income shortfall is for you (or your spouse, or both of you) to stay in the workforce longer than you had planned. This may allow you to continue supporting yourself with a salary rather than dipping into your retirement savings.
Delaying retirement might allow you to delay taking Social Security benefits (which may increase your benefit) and/or delay taking distributions from your retirement accounts. The longer you can delay tapping into your retirement accounts, the longer the money will last when you do begin drawing down those funds. Plus, the longer you delay retirement, the longer you may be able to contribute to an employer-sponsored retirement plan, or earn additional pension benefits.
While you might hesitate to start on a new career path late in life, there may actually be certain unique opportunities that would not have been available to you earlier in life. For example, you might consider entering the consulting field, based on the expertise you have gained through a lifetime of employment.
Reevaluate your expectations
If your projected income shortfall is severe enough or if time is too tight, you may realize that no matter what measures you take, you will not be able to afford the lifestyle you want during your retirement years. You may simply have to accept the fact that your retirement will not be the jet-setting, luxurious, permanent vacation you had once envisioned.
As a woman, you face special retirement planning challenges, but with careful planning, you'll hopefully be on track to a secure, fulfilling retirement.
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