Are You Female or Married to One? The HUGE Retirement Disadvantage You Will Face

While there are lots of benefits to marriage, if you are a woman or you are married to one, you face a a huge retirement disadvantage — a significantly steeper climb toward having adequate retirement savings.
retirement disadvantage
A new study from TIAA estimates that in order for two recent college grads to have the same amount of money for retirement, the average man would need to save 10% of  his earnings every year while the average woman needs to save nearly twice that amount — 18% of her yearly salary.

Why the huge discrepancy and what can you do about it?

6 Reasons Women and Couples Need to Save a Higher Percentage of Their Earnings

1. Women Earn Less than Men: According to the U.S. Census Bureau, women earn 78 cents for every dollar relative to men.  Women simply earn less money that can go to savings.

2. Women Live Longer than Men: The average life expectancy for a 65 year old woman is 85.5 (vs 83 for men).  This means that women have 2.5 more years of retirement to fund that men.

3. Women Consume More Healthcare: Largely because women live longer, they consume more healthcare than men. There is also evidence that women face more chronic disease which costs more. Healthcare is a costly expense.

4. Women Spend Less Time in the Work Force: Women spend less time in the work force due to taking time off to have children.  Many women also take a break again later in life to care for aging parents.  Overall, studies find that — on average — men work 38-39 years while women work 29.  This just means that women have less time and less money to save for retirement.

5. Working Fewer Years at a Lower Salary Means Reduced Social Security: Because women spend less time in the workforce and earn less when they are working, their Social Security benefit is naturally lower than that of a man’s.

6.  Women Will Likely Live Alone for Part of Retirement: Because women live longer than men, it is likely that they will be living alone for a period in retirement.  This means that one person will have to sustain the household income rather than two.  As the TIAA study points out, “The expenses of living alone are dramatically higher than when two people have the opportunity to share household expenses.”

What Women (or the Men They Are Married to) Can Do for a More Secure Retirement

If You Are Young, Be Aware of Additional Savings Need and Save More

If you are reading this article before nearing retirement, then you may want to take the information to heart and try to save more to close the natural savings gap.

Consider Social Security Choices Carefully

You have a lot of choice when it comes to deciding when to start Social Security and how to collect benefits.

  • If you are married (or even divorced), you can opt to take benefits based on your own earning history or that of your spouse (or ex spouse if you were married 10 years or more).  Everyone should research and compare spousal benefit options.
  • The longer you wait to start benefits, the higher your monthly check will be.  It may be especially important for women to delay the start of Social Security because they will live longer and are therefore likely to earn far more over their lifetimes if they wait to start.

Try the break even Social Security calculator to figure out the best time to start benefits.

Consider Buying an Annuity

Lifetime annuities can be an excellent way to guarantee lifetime income for as long as you (or your spouse) live — no matter how long that turns out to be.  In exchange for a lump sum of money, a lifetime annuity insures a certain level of lifetime income.

According to TIAA, what makes annuities particularly interesting for women is that, “even though women have longer life expectancies, the Supreme Court held that when companies offer lifetime income through their retirement plans they must use unisex life expectancy tables. The net result is that men and women of the same age with the same savings will receive the same dollar amount each month by opting into a lifetime income plan offered through their company.”

Estimate how much income your savings could buy with a lifetime annuity calculator or see what happens to your overall retirement plan when you try out a lifetime annuity in the NewRetirement retirement calculator.

Use a Retirement Calculator Designed for Women and Couples

Retirement planning is complicated.  Retirement planning when you are a married couple — or any kind of couple in a committed relationship — is doubly complicated.  You need to use a retirement calculator that is designed for couples. Not only are there double the financial considerations, but your values and priorities may diverge and this all plays a big part in your retirement plan.

The NewRetirement retirement planning calculator is designed for couples.  This tool assumes that your goal is to pay for both you and your spouse — which is not always the case for other popular online planners.

Furthermore, NewRetirement helps you set individual life expectancies for each person and factor in varying healthcare costs. It also allows individual income, savings, Social Security, retirement dates and much more.

This system was named a best retirement calculator by the American Association of Individual Investor’s (AAII). Take two minutes to enter some initial information, then see where you stand today. Next, start adding more details and changing some of your information. Discover meaningful ways you can improve your retirement finances.

Find out how much you should save for retirement



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