Women Face Unique Circumstances In Planning For Retirement

By Pamela Yip
The Dallas Morning News.

When it comes to retirement, women face a unique set of circumstances and should learn about managing money.

“They have to realize they’re going to live longer,” said Erin Botsford, certified financial planner and president of The Botsford Group in Frisco, Texas. “Ninety percent of women end up having to manage their own money so they need to get comfortable with that.”

A woman who’s 65 today has a 54 percent chance of living to age 85, compared to a 41 percent chance for a man, said S. Katherine Roy, chief retirement strategist at J.P. Morgan Asset Management.

“Life expectancy tells only half the story,” said Roy. “Plan on the probability of living much longer, perhaps 30-plus years in retirement.”

For married couples, there’s a 47 percent chance that one spouse will live to age 90, she said.

That’s one reason why it’s important for married women to participate with their husbands in financial planning.

“We find women disengage when their response is very different than their husband’s,” Roy said. “If I am married to someone who’s very risk-tolerant and I’m very risk-averse, rather than having a voice in the conversation, we tend to disengage and defer to our husbands to be the decision maker.

“That doesn’t necessarily lead to the best outcomes. Women tend to stay invested, tend to trade less, tend to stick to the long term. Men tend to trade more and tend to be more volatile, so it really should be a combination of the two collectively together deciding how to invest their wealth that will likely lead to a better outcome.”


Learn about risk and how much of it you can tolerate.

“Find an adviser who will help you understand risk,” Roy said. “No one sits down with women and talks to them about the different types of risk.”

Understanding risk also means knowing why you need to invest for the long haul.

“I innately am a very risk-averse person, but I understand, and I’ve been taught, that I have 30 or more years to save and invest for retirement and I have a lot of risk capacity,” Roy said. “I understand that I perceive the market to be very volatile, but when I look over the long run, it actually is not if I get invested and stay invested.”

The more advisers have this conversation with women, the better because they will learn to diversify their holdings and stay invested for the long run, she said.

“Understand the risk you’re taking on and why,” Roy said.

Social Security pays you more if you don’t claim benefits early. This is critical.

Essentially, you have three choices: You can start receiving benefits as early as age 62.
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You can wait until you reach full retirement age, somewhere from age 65 to 67. Or you can delay as long as age 70.

But keep in mind that the earlier you start receiving benefits, the less you’ll receive each month. That’s because your benefits are reduced a fraction of a percent for each month before your full retirement age, which is based on the year of your birth.

Conversely, the longer you wait, the greater your monthly benefit will be.

For every year you delay past your full retirement age, up to age 70, your benefits will rise by 6 percent to 8 percent.

If your spouse takes Social Security early, it can hurt you in the long run.

This is particularly true when one spouse earned the majority of the income. Waiting results in a much larger survivor benefit for the spouse who earned less.

“If he has made the decision to take it at 62, he’s handicapped what my ultimate survivor benefit is going to be as a function of his decision,” Roy said.

So make sure you discuss with your husband your strategy for claiming Social Security benefits.

You’ll pay more for health care because you live longer, so you’ll need to factor that into your retirement plan.
“It’s the one category you spend more on as you age,” Roy said.

Women also are more likely to need long-term care.

“We used to say that if they had net worth of more than $5 million, they didn’t need long-term care insurance,” Botsford said.

“That’s not the case anymore because the cost of extended care or home health care is so expensive. Every woman, everybody over the age of 50, you need to have long-term care insurance.”

So have a plan for retirement, know where you stand with it, diversify your investments and invest for the long term.

Most of all, claim your place at the table when it comes to discussing finances and investing.
Pamela Yip is a personal finance columnist for the Dallas Morning News.

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