Women Face High Risk of Poverty During Retirement; How to Protect Yourself

iStock_000007041715SmallMore than half of all Americans worry they won’t have enough money during retirement, but women are more at risk of this than men.

More than half (52.6%) of women age 65 and older are considered “economically vulnerable” compared to 41.9% of men in the same age group, according to the Economic Policy Institute’s 2013 Financial Security of Elderly Americans at Risk report.  (“Economically vulnerable” is defined as having  income that is less than two times the supplemental poverty threshold, using metrics from the U.S. Census Bureau.)

There are a range of reasons that women face a greater poverty risk than men:

  • Income: Average income for 65-plus females is about 25% lower than for males.
  • Time Working: More women than men spend time out of the workforce. Women take time off to have families and provide care for an aging loved one — which means less saving for retirement and lower Social Security payments.
  • Longer Lives: Women also have longer life expectancies than men.  According to the Social Security Administration, a man reaching age 65 today can expect to live, on average, until age 84 while a woman turning age 65 today can expect to live until age 86.  Women’s longer life spans translates into longer retirements—and more time for money to run out.

The good news is that there are a few things women can do to make sure they can have a safe and secure retirement.

Participate in the Planning Process

For married couples, too often retirement planning is the responsibility of one spouse or the other.  However, it is very important for both spouses to participate in the planning process and to understand and advocate for their own lifetime income needs.  Social Security and retirement investments can be optimized to help protect your spouse’s quality of life.

If you are a single, widowed or divorced woman, you probably already know the importance of understanding your personal financial picture.

Need help with planning?  Get a free one on one session with a financial advisor or use an online retirement planning calculator.

Optimize Social Security Benefits

The full retirement age for receiving Social Security benefits is now 66, although you can opt for an early retirement age of 62. But the longer you can wait to start receiving payments, the better for your financial picture.

For example, a woman who earned an average of $75,000 a year during her working years could receive $3,053 per month if she waits until she turns 70 to claim Social Security. If she decides to claim earlier, starting at 65, she would receive an estimated $2,290 per month according to New Retirement’s social security calculator.

Exploring spousal benefits  is another way to optimize a woman’s Social Security payments.

A financial planner can help you to figure out the strategy for you to start receiving benefits for optimal results.

Explore Lifetime Income Annuities and Survivor Benefits

Another option to explore: lifetime income annuities. This insurance product guarantees you lifetime income payments based on an upfront premium.

For a single person applying for a lifetime income annuity today, at age 70, with a $50,000 investment, a lifetime annuity could translate into $386 per month.

Joint and survivor annuities allow for surviving spouses to continue benefiting even after the first spouse has passed away. Under these annuities, the first annuitant receives payments for life. After the first annuitant passes away, the second annuitant, or the spouse, continues to receive payments for life, though the new amount may differ from the original amount.

Tap Into Home Equity

If you own your home, using a reverse mortgage can be a great way to stay in your home and fund retirement. The Home Equity Conversion Mortgage (HECM) program allows homeowners age 62 and older to access their home equity in the form of a non-recourse loan that is insured by the Federal Housing Administration.

Borrowers can receive their funds in a few different ways, including as a lump sum, in monthly payments, as a line of credit, or some combination of payment plans.

If you plan on staying in your home long-term and have amassed quite a bit of home equity, a reverse mortgage could help you improve your cashflow situation and have reserves for unexpected health events, home repairs, or even simply paying off an existing “forward” mortgage and eliminating those monthly payments.

The amount proceeds you can borrow under you reverse mortgage loan will depend on a few factors, including your age, your home’s appraised market value, the amount of equity you’ve built up, and current interest rates.  (Estimate your reverse mortgage loan amount here.)

At today’s rates, a 70-year-old borrower who owns her $300,000 home free and clear may be able to qualify to receive more than $800 per month.

Work Longer

Because women may have taken time off from work and because women live long lives, it can make sense for women to work longer than men at the end of their careers.  Working longer can boost your Social Security payments and give you the opportunity to save more money.



NewRetirement Planner

Do it yourself retirement planning: easy, comprehensive, reliable

NewRetirement Planner

Take financial wellness into your own hands and do it yourself retirement planning: easy, comprehensive, reliable.

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