Women and retirement: How to overcome obstacles and identify opportunities for lifelong financial security

From longer life expectancies to potential career breaks, women have a unique set of challenges to consider when preparing for retirement. Understanding what these challenges are and how to prepare for them can help you create a stronger financial plan for your retirement.

What you'll learn

• Saving challenges
• Impact of taxes and inflation
• Income in retirement

Saving challenges

saving challenges women should consider when planning for retirement:

• Longer life expectancies: On average, women live longer than men. Therefore, they may need to plan for more years in retirement.¹
• Living alone: Because of longer life expectancies, some women may have to spend part of their retirement living alone, by choice or circumstance, and should plan for that possibility.
• Career breaks for caregiving: Women are more likely to take time out of the workplace or cut down on hours to care for children or aging family members, which could mean loss of income and other employer benefits, such as retirement and health insurance.²
• Less long-term career earning potential: Due to some women spending less time in the workplace and the fact that women still face a wage gap (typically 82-25% of what men earn), women in turn have less earning potential, which could result in less retirement savings and a lower Social Security benefit.³

Impact of taxes and inflation

General guidelines state that you should plan on needing 60%-90% of pre-retirement income when you retire, but this doesn’t take into account your individual goals and challenges. When starting the process of planning for retirement, taking the above challenges and considering whether they may affect you is the first part of the puzzle.

Then, think about what current expenses you have now might change: such as your mortgage might decrease, yet health-care costs might increase. Consider the plans you have for your retirement, such as travel or hobbies, and have a line item for the anticipated costs of those plans.

After having those cost projects in mind, consider the potential impact of inflation on those expenses. If inflation runs at its historical long-term average of about 3%, a given sum of money would lose more than half of its purchasing power in 25 years. Therefore, to outpace inflation, you should try to have a strategy in place that allows your income stream to grow throughout retirement.

Taxes are another thing to consider when putting together your retirement plan, specifically understanding whether the income you are counting on is or is not subject to tax. For example, private pensions are generally fully taxable. You might be surprised to learn that a portion of your Social Security retirement benefits may also be taxable, depending on your filing status and total annual income.

On the other hand, long-term capital gains and qualifying dividends currently benefit from a different tax rate, and some specific investments, like certain municipal bonds, could be exempt from federal income tax and sometimes state.

Your tax-advantage retirement accounts, like traditional IRAs and 401(k)s, are also going to be taxed as if they are ordinary income, whereas special rules apply to Roth IRAs, Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s.

Income in retirement

After taking both potential challenges, retirement plans and expectations, and inflation/taxes into account, it is time to see how much you will need to plan for in retirement. Retirement income generally comes from a combination of pensions, Social Security, and personal savings.

Pension income: While pensions are less common today, 18% of workers (public and private sectors combined) participate in a traditional pension plan. If you are one of those, at age 50, you should request an estimate from your pension provider to review projected benefits and payout options.⁴

Social Security: For many, Social Security is the primary or majority source of retirement income. How much you earn will depend on how long you worked and your earnings history, your 35 highest earning years, and the age at which you claim benefits. If you haven’t earned enough to qualify for Social Security independently, you may be eligible for spousal and survivor benefits.⁵

Personal savings:Other savings options may include IRAs, 401(k), 403(b), or 457 plans and brokerage accounts.

Even with this combination, some women still fall short. If this is the case, you could adopt strategies to spend less during retirement, work longer to increase retirement savings, continue to work in some capacity during retirement, or look into additional income sources such as downsizing or a home-equity borrowing (with caution).

While you can’t account for everything retirement might throw at you, having a retirement strategy can help support your long-term financial, physical, and emotional well-being. To learn more or explore a customized plan, connect with an Alliant Retirement and Investment Services financial consultant. You can also watch the full webinar on this topic on YouTube.