Challenges and Solutions of Retirement Planning for Women

Saving for retirement isn’t easy in ordinary circumstances. But with wage growth near non-existent and underemployment ridiculously high it becomes challenging for most and even harder for most women.

According to a recent study, only 62 percent of women said they were saving for retirement, just 15 percent said they were saving enough and 22 percent were barely saving at all!

There are numerous reasons why many women fall behind in saving for their post-career lives, ranging from lower pay and taking care of others to taking time off from the workforce.

“Women will save for their kids before they’ll save for themselves,” said Cindy Hounsell, president of the Women’s Institute for a Secure Retirement (WISER).

Have you planned well enough for retirement?

Cost of Being a Caregiver

Is this just a product of different saving and spending habits? Hardly. Women face special hurdles when it comes to saving for the so-called golden years.

For one thing, women are more likely than men to step out of the workforce, or work part-time to care for children or elderly parents.

When they do work, women are often confronted with the gender pay gap. That gap has narrowed since it was first identified, but on average, women still are paid just 78 percent of what men with equal qualifications receive, according to The American Association of University Women.

Divorce Recovery

Statistically, divorce tends to have more negative financial consequences for women than for men. A study conducted by a professor at the University of Connecticut found that after divorce, women who ramped up their careers fared worse in retirement than those who remarried or even those that never divorced initially.

Further, U.S. Census Bureau data shows that women who were divorced reported lower household income than men in the 12 months following the divorce and were more likely to receive public assistance.

Invest for Longevity

When women do save for retirement, another challenge they face is that they may invest too cautiously. Some research has found that some women view themselves as less financially knowledgeable than men do, thereby expressing less confidence in their financial decision-making.

A recent study of women’s financial behavior conducted by Prudential, found that the “Women we surveyed feel no more prepared to make wise financial decisions today than they did two years ago or even a decade ago.”

To top it off, since women have a longer life expectancy, whatever they do save has to last longer—only that’s not happening. The poverty rate among women older than 65 reached 11.6 percent in 2013, and elderly women accounted for two-thirds of the elderly poor.

Get Ahead of the Savings Curve

Fortunately, there are steps women can take steps to boost their nest eggs.

First, in terms of tax-deferred savings, it’s a great idea to take advantage any opportunity available:

• Contribute at least enough to your 401(k) or 403(b) to receive the maximum employer match.
• Contribute to a Roth IRA. The advantage of tax-free growth leaves more money to live on in retirement.
• Take advantage of the “Saver’s Credit”, which enables those below certain income thresholds ($61,000 for married couples filing jointly, $30,500 for single filers in 2015) to offset some of their retirement plan contributions.

Educate, Educate, Educate

Next, women can boost their financial knowledge and build their confidence in making financial decisions.

• Look for nonprofit organizations such as American Association of Retired Persons (AARP) or WISER that provide workshops or seminars on financial planning strategies.
• Consider taking classes on money & finance at your local community colleges and universities. There is comfort and empowerment for women learning about retirement planning together. The views, perspectives and ideas shared vary greatly from many of their male counterparts.
• Get a good read that covers knowledge of investing basics, not the do-it-yourself versions. Knowledge is power!

Consult a Qualified Professional

Equally as important as all the other techniques, seek out a financial professional, planner or registered investment advisor that:

• You feel comfortable with and understands your circumstances
• Is willing to coach/educate you during the planning/investing process
• Has logged years of experience in working with people like yourself
• Whose fees are transparent and recommendations are objective
• Adds value by listening and introducing fresh new ideas

You can take back control of your financial health! Every journey begins with the first step!

The information contained herein does not constitute tax or legal advice.  Any decisions or actions should not be made without first consulting a financial professional, CPA or attorney.

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.

Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm. Securities offered through an affiliate, Spire Securities, LLC. Member FINRA/SIPC.

 

Suddenly Single? Start Fresh: Protect Finances

Losing a spouse through death or divorce can be emotionally devastating and is often a difficult time to make important life decisions. Yet it’s this very time that attention needs to be paid to important financial matters such as retirement assets, budgeting on a single income, appropriate insurance, or reviewing Social Security benefits.  Should you become suddenly single, avoid the risk of making emotionally driven and potentially harmful financial decisions. Here are six important and actionable steps to help to protect your personal finances.

1. Update your financial accounts.

When you lose a spouse, you’ll likely need to change the registrations on any financial accounts that are owned jointly. Such ownership changes typically require certain documentation.

If you’re widowed, you need to provide your financial institutions with copies of your spouse’s death certificate in order to shift accounts from joint ownership into your own name. In a divorce, changing ownership requires first determining how you’ll divide jointly owned assets. Usually this is through court orders and/or divorce agreements. Then securing any signatures guarantees or documentation required by your financial institutions will be needed to make the necessary changes.

Caution: Attention needs to be paid to the conditions and methods under which you divide assets or change ownership. Following the wrong advice could result in significant tax burdens. You should consult your tax or financial planner…not your broker.

2. Divide or roll over retirement assets.

Pension and retirement account assets have their own set of rules when it comes to changing ownership or splitting the assets.

Death of a spouse
Generally, upon the death of the account owner, retirement account assets will pass directly to the beneficiaries designated on the account. Some questions to consider in this case might be 1) Should you withdraw funds, 2) Should you rollover the assets into your own IRA or 3) Do you create a Beneficiary IRA or 4) Waive your right to the assets? The answers might not be easy. Do you need the money now? Will you be subject to tax and/or penalties? Will you be required to take a required minimum distributions? What will this do to your estate? Depending on your personal circumstances, the answers will be varied. It’s important to consult with a financial planner or accountant to evaluate your situation before making decisions.

The next critical issue to address here is updating the beneficiary designations on your own retirement accounts—such as 401(k)s, 403(b)s, and IRAs. Even if your will were to include your retirement assets, your beneficiary designations supersede them.

Divorce

Retirement assets are often split up as part of a divorce settlement through a qualified domestic relations order (QDRO). A QDRO is a legal arrangement that either recognizes an alternate payee’s right to receive (in this case the ex-spouse) or assigns to that alternate payee all or a portion of his or her former spouse’s retirement account balance and/or pension benefits.

IRAs are divided through a one-time distribution from one spouse’s IRA into the other spouse’s IRA, without income tax or early withdrawal penalties. But this must be a court-approved transfer; otherwise, the distribution is treated as taxable to the original account owner, while the spouse on the receiving end gets the money tax-free.

3. Re-evaluate your income and budget.

Chances are, when you’re suddenly single, you may be taking a cut in your income, so you may need to adjust your budget accordingly. Start by listing your essential expenses (housing, food, insurance, transportation, etc.) and your discretionary expenses (dinners out, vacations, clothing, etc.). Try to match reliable sources of income (salary, Social Security, pension, etc.) to your essential expenses and see where you might trim your discretionary spending.

If you’re near retirement or are already retired and fear an income shortfall, you might consider creating a regular source of income by focusing your portfolio on income producing investments or yield. This can turn your retirement savings into a source of predictable income that you can use to budget wisely.

4. Evaluate your insurance needs.

What you’ll have and what you’ll need for insurance can change dramatically when you lose a spouse through death or divorce. It’s important to take a careful look at all the different types of insurance that are available to see where you may need to adjust your coverage. Be sure to review:

Life insurance. If you are the surviving spouse and the beneficiary on your deceased spouse’s life insurance policy, you will typically receive the proceeds tax free. But if you are still caring for children, you may want to either purchase or increase your own life insurance coverage to make sure they will be protected in the event of your death.

If you divorce, remember to consider (1) changing the beneficiary on your life insurance if it is currently your ex-spouse, and (2) purchasing or modifying your coverage to adequately protect your children if either you or ex-spouse dies.

Health insurance. Even if your spouse carried your family’s health insurance coverage, you can continue to maintain it for a period of time, whether you are divorced or become widowed.

Through the Consolidated Omnibus Budget Reconciliation Act (COBRA), if you’re going to lose health benefits (because of death, divorce, job loss, etc.), you can continue coverage for up to 36 months—so long as you pay the premiums, which can be up to 102% of the cost to the plan.

Because COBRA coverage is expensive in many cases and doesn’t last indefinitely, you may want to check out other insurance options, whether through your own employer or by evaluating individual plans available through the Affordable Care Act (ACA).

Disability insurance. We all hope we will never need it, but disability insurance is one of the least understood and most useful ways of protecting ourselves and our loved ones. What if you were injured or sick and couldn’t go to work? Disability insurance is designed to protect you and your loved ones against lost income.

Long-term-care insurance. If you’re over the age of 50, you may want to consider buying long-term care insurance (LTCi) to help keep potential costs of nursing home stays and home health care from depleting your income resources if you become seriously ill or injured.

5. Review your credit.

When you’re suddenly single, your credit can be among your most valuable assets—so protect it wisely. After divorce or the death of a spouse, you may want to request a copy of your credit report to take inventory of all the accounts that are open in your name and/or jointly with your former spouse.

If you’re divorced, you’ll want to close joint credit accounts and shift to single accounts so that an ex-spouse’s credit score won’t affect your credit rating. If you’re widowed, contact all three credit bureaus (Experian, Equifax, and TransUnion) to let them know that your spouse has passed away, to keep others from falsely establishing credit in his or her name.

Unfortunately, a surviving spouse is often responsible for paying the deceased spouse’s credit card bills, whether these were joint or individual accounts. It’s always worth calling the credit card company, however, to negotiate better payment terms if necessary.

6. Maximize Social Security benefits.

Here’s some good news: Even if you’re now on your own, Social Security recognizes that you were once part of a married couple, and offers benefits to both surviving and ex-spouses. Widows and ex-spouses are generally entitled to 50% of their former spouse’s Social Security benefits, if those benefits would be greater than their own Social Security benefits.

As a surviving spouse, you can receive full Social Security benefits at your full retirement age or reduced benefits as early as age 60. A disabled widow or widower can get benefits as early as age 50.

If you’re divorced, you could be eligible for Social Security benefits, based on your ex-spouse’s record, if those benefits would be greater than your own retirement benefits. However, your ex-spouse must be eligible for Social Security benefits, and generally you must be unmarried and at least 62 years old. In addition, you must have been married for at least 10 years.

You can’t avoid the turmoil that comes with divorce or the death of a spouse, but recognizing how your personal finances might change could help you make thoughtful, rather than rushed, decisions and provide more solid financial ground as you transition to being single.

The information contained herein does not constitute tax or legal advice.  Any decisions or actions should not be made without first consulting a CFP, CPA or attorney.

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.

Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm. Securities offered through an affiliate, Spire Securities, LLC. Member FINRA/SIPC.

Successful Retirement Planning Strategies For Women

Everyone faces similar challenges in planning for their long-term financial goals, such as a successful retirement.

But women seem to have a few unique obstacles to overcome. Fortunately, through a well conceived financial plan and implementing a solid strategy, women can alleviate those obstacles:

Retirement Planning for Women

• Longer life expectancies – Women on average live seven years longer than men which means they need to plan for a longer, more independent retirement.
• Lower earnings: – According to Women’s Institute for a Secure Retirement (WISER), men are out-earning women at an average of 23 cents on the dollar. Lower earnings result in less money contributed to retirement plans and social security.
• More time out of the workforce – Women typically are the caregivers. They may spend time out of the work force to raise a family or care for ailing parents or other relatives. This time away can potentially negatively impact the raises and promotions. To compound this, while they are out of the workforce, women are not contributing to their pension, other retirement plans or social security which means they end up with less in savings than men.

Creating a retirement plan will help women to feel more in control of their finances and give them confidence about achieving their long-term financial goals.  There are a couple of steps women can take:

• Educate yourself by reading and attending workshops.
• Review your credit usage and reduce any unnecessary debt.
• Take an active role in your investments including your retirement plans.
• Invest for long-term growth, being balanced in your risk tolerance.
• Maximize your contributions to your retirement plan.
• Consider working with a financial planner.

Remember, you are in control of your financial future. Careful planning and putting a long term strategy in place can go a long way towards overcoming the obstacles, achieving your long term retirement goals and living the retirement lifestyle you desire.

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC located in Newburgh, New York and specializes in planning for women. His goal is to empower, educate and engage women around money matters.

For more information contact Steven at Compass Asset Management Group, LLC at 845.563.0537 or Contact@CompassAMG.com

Steven M DiGregorio is an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm. Securities offered through an affiliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.