Retirement Planning for Women: 9 Key Differences and a Step-by-Step Guide to Navigate Them
In today's world, women are redefining their roles in society, and it’s now more apparent than ever in the realm of financial and retirement planning. With changing societal norms, economic shifts, and evolving career trajectories, women face unique challenges and opportunities when securing their financial futures. We’ve written this blog to educate you on why your retirement planning is unique and provide tips on how to better prepare.
Why Women's Retirement Planning is Unique
Longevity: Women, on average, live *5.8 years longer than men, that’s why you need to plan for an extended retirement period. Whether single or married, accounting for this longevity is crucial, necessitating greater savings.
Healthcare Costs and Long-Term Care: Women are more likely to require long-term care due to factors such as increased life expectancy and higher rates of chronic health conditions. Planning for healthcare expenses, including long-term care needs, is essential to prevent financial strain later in life.
Caregiving Responsibilities: Women often shoulder caregiving duties for aging parents or spouses, affecting their ability to save for retirement. Balancing caregiving with career aspirations requires careful financial planning to ensure stability and support for loved ones without compromising your retirement security.
Gender Pay Gap and Retirement Savings Disparities: Despite progress, women still face the gender pay gap, resulting in lower lifetime earnings and reduced retirement savings compared to their male counterparts. Developing strategies to maximize Social Security benefits and explore alternative retirement income sources is essential for mitigating the impact of these disparities on your retirement security.
Parenting and Career Interruptions: If you plan to have a family, you need to understand the financial impact of potential career interruptions or reduced work hours to raise children. Additionally, if you plan to work full-time, there’s a large cost associated with childcare. Strategically plan for these costs and potential breaks in income during your working years to ensure they support your long-term retirement objectives.
Unique Considerations for Same-Sex Marriages: If you're in a same-sex relationship, your retirement planning needs some extra attention. Especially when considering longevity and saving enough money to cover you and your partner for a longer retirement period. Healthcare costs might affect your savings more, especially if one of you needs care. Plus, if you want to have children, options like adoption or assisted reproductive technologies can make financial planning more complicated.
Independent Women: If you're planning your retirement solo, it's crucial to create a strong financial plan that considers factors like living longer, healthcare expenses, and relying solely on your income. Additionally, if you're planning on starting a family through adoption, IUI (intrauterine insemination), or IVF (in vitro fertilization), it's essential to recognize the additional financial implications and the cost of raising a child and make sure to include these expenses in your financial plan.
Divorce and Widowhood: Divorce and widowhood can significantly disrupt your financial well-being, especially if you are not actively involved in managing the household finances during your marriage. Effective retirement planning must account for the potential ramifications of marital transitions and equip you with the necessary resources to navigate these life changes confidently.
Asset Depletion from Spousal Care: You may likely outlive your spouse or assume caregiving responsibilities for ailing partners, and the cost of long-term care can deplete household assets, leaving you with fewer resources to support your retirement needs. Planning for contingencies and exploring long-term care insurance options can help mitigate this risk.
How to Plan: A Guide to Getting Started
While many are inclined to wing it, if you’re here, you likely understand it’s much better to have a thoughtful and strategic approach when it comes to retirement planning.
That’s why we created this guide to help you get started by better understanding the steps you can take to create a better plan for your retirement.
Get Organized
Start by gathering and organizing all your financial documents - bank statements, investment accounts, retirement savings, insurance policies, and estate planning documents. Store hard copies and/or digital copies in a safe place. A clear understanding of your financial landscape lays the foundation for effective retirement planning.
Define Your Goals
Take some time to write down your goals and priorities. Image your ideal retirement age, travel plans, philanthropic goals, and what legacy you want to leave behind. Clear and specific goals will guide your financial plan toward your vision for the future. Download your FREE Goal Setting Guide below.
Know Your Numbers
Assess your financial health by understanding your cash flow and net worth. Track your income, expenses, and savings to identify areas for improvement. Calculate your net worth: (assets - liabilities = net worth) This gives you a snapshot of your financial position and empowers you to make informed decisions.
Invest Your Money
Develop an investment strategy that aligns with your time horizon, risk tolerance, and retirement objectives. Diversify your investment portfolio across asset classes such as stocks, bonds, real estate, and alternative investments to mitigate risk and maximize returns. Consider the impact of inflation, taxes, and market volatility on your investments, and regularly review and rebalance your portfolio to ensure it remains aligned with your long-term goals.
Account for Time Horizon and a Longer Retirement
Retirement planning is a marathon, not a sprint. Ask yourself these questions:
How long should my money last? Do I have a family history of longevity?
(Tip: At TARA Wealth we generally run financial plans and projections through age 95 or 100.)
When do I want to retire?
How much income will I need in retirement?
Address Healthcare Costs
Healthcare expenses will be a significant part of your budget. It's critical to consider your options in advance, particularly within five years of retirement. Explore options like Medicare, supplemental insurance plans, and long-term care insurance to ensure adequate coverage for your medical needs in retirement—factor in healthcare costs when projecting your retirement savings. Consider strategies like setting up a health savings account (HSA) or budgeting for unexpected medical emergencies to manage and mitigate these expenses effectively.
Budgeting for Childcare and Parental Leave
Anticipating the cost of childcare and planning for parental leave during career breaks is essential for maintaining financial stability. Create a budget with future childcare expenses and explore flexible work arrangements to help you balance work and family responsibilities while safeguarding your financial future.
Supporting Aging Parents
Talk with your parents and understand their plan for caregiving needs. Be prepared for potential financial impacts and open communication with family members. Proactive planning can help preserve your financial well-being while caring for loved ones.
Are you ready to take charge of your financial future and want to work with fiduciary financial planners who truly understand your unique needs?
Reach out to Amanda DeCesar, CFP®, and Amber Schiffert at hello@tarawealth. We specialize in comprehensive financial planning and wealth management for Women, by Women.
As a women-owned small business, we are dedicated to serving clients throughout California, North Carolina, and across the United States. Our mission is to support women through fiduciary financial planning and wealth management. Contact us today to schedule a complimentary introduction meeting and start planning for the future you deserve.
*QuickStats: Life Expectancy at Birth, by Sex — National Vital Statistics System, United States, 2019–2021. MMWR Morb Mortal Wkly Rep 2023;72:775. DOI: http://dx.doi.org/10.15585/mmwr.mm7228a5
This material is provided for educational purposes only. It does not consider your specific retirement objectives, financial situations, investment objectives, or needs. This is not intended as a recommendation or financial advice. Before making any retirement, investment, or financial planning decisions, it is important to consider your circumstances and consult with a qualified professional.
