A striking statistic in the midst of the current retirement boom is that women have a 25% to 30% savings shortfall when compared to men with similar savings and investing patterns. Here are 6 tips and strategies to help us catch up:
Establish your own Saving Accounts – Because women have inconsistent work patterns we should not depend exclusively on employer plans for saving. Consider using a Roth IRA, a traditional IRA or even a taxable account while working to supplement your workplace plan. And don’t miss out on saving during the years you are not working. A working husband can make tax-deferred contributions to his nonworking wife’s spousal IRA (traditional or Roth). The government provides good information at Individual Retirement Arrangements (IRAs).
Maximize Your Company’s Savings Plan – If you can afford to save the maximum allowed by law, do so, and if not, save at least the amount that will enable you to get your employer’s match. The annual maximum contribution allowed by law is reported at Workplace Contributions. If self-employed, the same maximum savings advice holds true. You may be eligible to use a SIMPLE IRA, a SEP IRA or a solo 401(k) for tax-deferred savings.
Take Advantage of the Catch-up Provision – As we approach our retirement years it can be a race to the finish line. The government allows workers over age 50 to contribute an additional “catch-up” amount to their tax-deferred savings plans. The catch-up provisions apply to workplace plans, Roth IRAs, traditional IRAs and SIMPLE plans as well.
Monitor your Social Security Record –By creating an account at www.ssa.gov you can periodically check your earnings record and estimated social security benefit. Report any errors in your earnings record to the Social Security Administration. Use your estimated SSA benefit for retirement planning purposes.
Review Beneficiary Designations – If it is your husband’s intent to leave his 401(k) and IRA to you be sure you are named as the beneficiary. A will does not direct the distribution of these accounts. It is not uncommon for a 401(K) or IRA account holder to overlook changing their beneficiaries after a major life transition like marriage or divorce.
Consider a Financial Advisor – Less than half of Baby Boomer women consult a financial advisor yet a majority, (over 60%), of women over 55 believe they have not done a good job planning for retirement. If finding a reputable advisor is a concern, ask a trusted friend, family member or a respected professional service provider such as your lawyer or CPA. If fees cause you reluctance to hire an advisor ensure that any prospective advisor discloses all their fees (trading, mutual fund, percent of assets, termination, tax reporting, etc.) and all the services they will provide. Candidly ask yourself – can a financial advisor help me reach my retirement goals better than I can after taking fees into consideration?