Retirement Tips for Women

retirement for women

In retirement, many women must do more with less. Thanks to a longer life expectancy, the average woman is facing bigger retirement expenses – and she may have to cover them with a substantially smaller nest egg and Social Security benefits. And that’s not all. When it comes to retirement readiness for women, a study by the education firm Financial Finesse1 found that a 45-year-old woman needs to save an additional $522,000 by age 65 to cover her expenses. A 45-year-old man faces a gap of just $267,000. (Those are median shortfalls; half of those surveyed needed more, half needed less.)

The issue has been in the spotlight as baby boomers enter retirement – but advisors who specialize in retirement planning for women say the gravity of the problem isn’t fully appreciated. “This is off-the-charts severe,” says Manisha Thakor, director of wealth strategies for women at BAM Alliance, a network of financial advisors. “There’s a train wreck happening, and society is saying, ‘the train may have some problems.’”

The financial-services industry is becoming more focused on women’s retirement savings gap. But the advice sometimes misses the mark. The message that financial firms send to women is “ladies, work harder,” says Sallie Krawcheck, a former top Wall Street executive and co-founder of a new online advisory service for women. Women are often told to save more and be less risk-averse in their investments – yet studies show that women are more diligent savers than men, and they achieve the same or better returns while taking on less-risky portfolios.

Fortunately, there are other financial options other than loading up on stocks or skimping on food and medicine. They may be able to plan ahead for career breaks, minimizing the financial fallout many women suffer when they take time away from work to care for loved ones. And many could benefit from finding an advisor who understands their unique challenges.

These challenges can be especially daunting for older women. The average Social Security benefit for women 65 and older is less than $14,000 per year, compared with $18,000 for men, and women are less likely than men to have guaranteed income from a defined-benefit pension plan. Women 65 and older are 80 percent more likely than men to be living in poverty, according to the National Institute on Retirement Security.2

So, what steps can women take in their retirement planning to ensure they have the security they need? The following retirement tips for women are a great place to start.

Smart Steps for Caregivers

Working as long as possible is one of the most effective ways for women to close the retirement gap. But women provide about two-thirds of family caregiving, according to AARP3, and with limited access to paid leave, many of them quit work to care for relatives. That can cost them not only their paycheck but also retirement account contributions, health insurance and Social Security benefits.

If you’re faced with such a choice, consider other options before leaving your job to care for a loved one. Search Eldercare Locator for adult day-care programs, in-home services and other resources in your area.

If you need to leave work, don’t stop saving for retirement. If you’re married, your working spouse can contribute to a “spousal IRA” on your behalf. The contribution limit in 2017 is $6,500 if you’re 50 or older ($5,500 for younger savers). Also, try to build up an emergency fund – perhaps a year’s worth of living expenses in cash – so you won’t have to dip into retirement savings to make ends meet.

Nearly 70 percent of family caregivers older than 40 have used their own money to help care for a loved one, according to AARP4. Go to to find programs that may help pay for medications, health care and food.

Also, don’t hesitate to ask whether your relatives might be able to pay you as an independent contractor for your caregiving services. That way, you may be eligible to contribute to a simplified employee pension plan or SEP IRA. (This year, you can contribute the lesser of $54,000 or 25 percent of your compensation.) If you go this route, to help avoid family misunderstandings consider preparing a personal care agreement outlining how much you’ll be paid, how much care you’ll provide and other details.

Find a Trusted Advisor

Many women have a troubled relationship with their financial advisor – or no advisor at all. Only one out of five women feels the financial-services industry understands her needs, according to a recent study by Prudential Financial5. Among women’s concerns: Advisors cost too much and use too much jargon, and it’s not always clear they’re looking out for their clients’ best interests.

New online advisory firms tailored for women are seeking to capitalize on this disconnect. Krawcheck’s Ellevest, for example, makes retirement projections based on women’s longer life expectancy and unique salary curve. While a man’s salary tends to peak in his sixties, a woman without an advanced degree typically sees her salary peak in her forties, Krawcheck says. Many online retirement calculators assume your salary steadily increases each year until retirement.

Other new advisory services aimed at women include SheCapital and WorthFM. But the gender-specific advice can come at a cost: Ellevest, for example, charges 0.5 percent of assets under management each year, whereas major robo-advisor competitors such as Betterment charge 0.35 percent or less.

If you’re seeking a human advisor, interview at least three candidates and get references from female clients. Ask if the advisor works with women who have net worth and life circumstances similar to yours, says Kathleen Burns Kingsbury, a wealth psychology expert. If you want to work with someone who is required to put your interests first, seek out an advisor who is registered with the Securities and Exchange Commission or your state securities regulator. Check the advisor’s background at Make sure the advisor can answer your questions. For an idea of some questions you should be asking, check out

Plan for a Longer Lifespan

Lisa Schweig, of Cambridge, Mass., is anxiously planning for a very long retirement. Schweig, 53, stopped working nearly 20 years ago to care for her young children. And her wife, now 59, “very much wants to retire now,” Schweig says. But “it makes me nervous,” she says, not knowing if they’ve saved enough. Both have some longevity in their families, and Schweig says she figures that they should take just 2 percent annual withdrawals from their nest egg to reduce the risk of outliving their money. That really wouldn’t be enough to live on, she says, but “you don’t know how long you’re going to live and what the market is going to do.”

As people grow older, one of their biggest fears is outliving their money. One option to consider is an annuity because they can give you a hedge against outliving your money. Annuities are long-term investments designed for retirement purposes.

A deferred income annuity works like this: You invest a lump sum with an insurance company in exchange for a guaranteed income stream that starts perhaps 10 or 20 years down the road. The longer the period of time you wait for payments to start, the more the payments will be. A downside is if you don’t live to the age selected for payments to start, you get nothing. Distributions are subject to income tax and, if taken before age 59½, a 10 percent federal tax penalty may apply. The annuity may be subject to lengthy surrender periods and early withdrawals subject to surrender charges. Guarantees are backed by the claims-paying ability of the issuer.

A new twist on the deferred income annuity is the qualified longevity annuity contract, or QLAC, which lets you invest up to 25 percent, up to a maximum of $125,000, of your 401(k) or IRA in the annuity and postpone payouts to as late as age 85, or as early as 70½. Once funds have been invested in a QLAC, they are exempt from the required minimum distribution rules until payouts begin after the specified annuity payout starting date. You cannot tap into a QLAC if you need money before the payout date selected and investment returns are locked in.

Rules regarding QLACs are strict; work with a knowledgeable tax advisor. Depending on your financial situation, investing in an annuity may or may not be in your best interest. Please consult your financial advisor for advice specific to your situation.

The following are hypothetical examples for illustration purposes only. They are not representative actual investment and individual investor’s results will vary.

Consider a 65-year-old woman who has $500,000 in a tax-deferred account. With option #1, she could generate steady annual pretax income of roughly $25,000 by investing $60,000 in a QLAC that will start making payouts when she’s 85, says Joe Tomlinson, a financial planner and actuary in Greenville, Maine. She invests the remaining $440,000 in a Treasury bond ladder to provide steady income during the 20 years she’s waiting for the QLAC to kick in.

A bond ladder is a portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of purchasing several smaller bonds with different maturity dates rather than one large bond with a single maturity date is to minimize interest-rate risk, increase liquidity and diversify credit risk. Bonds can be a good tool to generate income however they are subject to certain risks, including credit risk, interest-rate risk, inflation risk and prepayment and extension risk.

With option #2, the woman could generate even more income – nearly $31,000 annually starting right away – if she invested the entire $500,000 in a single-premium immediate annuity. A single-premium annuity, or immediate payment annuity, is an annuity contract that is purchased with a single lump-sum payment and in exchange, pays a guaranteed income that starts almost immediately. But she’d be giving up access to that $500,000, which may not be the wisest decision if she doesn’t have a lot of other resources, Tomlinson says.

With option #3, the woman could simply leave her money in the stock market and follow the 4 percent rule for drawing down her portfolio. The 4 percent rule is sometimes used to determine a sustainable portfolio spending rate throughout retirement. Most studies assume a balanced portfolio anywhere from 40 to 60 percent equities. Using this guideline, she’d have just $20,000 to spend in her first year of retirement. In order to maintain her purchasing power, the dollar amount would need to be adjusted annually for inflation thereafter. In this scenario, she’d be at the mercy of market swings, as there is no guarantee the market will not drop and her value fall.

All investing involves risk, including possible loss of principal. To learn more about annuities and how they may fit into your retirement plan, visit

Another safety net to consider: Long-term care insurance. Women account for two-thirds of all long-term care benefits paid. But issuers in recent years have recognized this fact and have started charging single women 20 percent to 40 percent more than single men. You can trim the cost of this coverage by opting for a shorter benefit period, less inflation protection or a longer waiting period before benefits kick in. To learn more about long-term care insurance, visit Or, to determine your long-term care needs, the calculator “What are my long-term care insurance needs” is a great place to get an idea of what your plan may look like.

A cheaper – though not ideal – alternative: Short-term care insurance. These policies offer benefits for up to one year. They still offer unisex pricing, “so a single woman has a decided price advantage,” says Jesse Slome, executive director of the American Association for Long-Term Care Insurance. But if you wind up needing extended care, these policies may prove inadequate.

As women should expect to live longer, it is important to know the answer to the question, “how long will my money last?”

Maximize Social Security

Women who are over 70, as well as those who are divorced or widowed, are likely to get most of their income from Social Security – so it is crucial maximizing these benefits. Yet most women claim early, slashing their monthly benefits.

Claiming at 62 locks you into a benefit that’s 25 percent less than you’re due at full retirement age (currently 66). If you delay claiming past full retirement age, you’ll earn 8 percent in delayed-retirement credits each year until age 70. On top of that, cost-of-living increases will be added to your benefit while you wait.

If you or your spouse claimed Social Security early but have not yet turned 70, there’s still time to boost your benefits. After you hit full retirement age, you can voluntarily suspend benefits and earn 8% each year until age 70. In some cases, the real value of this strategy comes in maximizing the survivor benefit for a woman who outlives her husband by many years.

Consider this example from Social Security Solutions, a firm that helps clients maximize their lifetime benefits: The husband, who is 62 years old, has a full retirement benefit of $2,400, while his 55-year-old wife has not earned any benefits of her own. If both claim benefits at 62, and the husband dies at age 85, the wife winds up with survivor benefits of $1,980, which she collects until her death at age 97. In total, the couple collects about $935,000 from Social Security.

But the couple might recognize that the wife is likely to long outlive her husband and rethink their claiming strategy a few years down the road. The husband can suspend his benefits from age 66 to 70. The couple gets no benefits for four years, but when the husband hits 70 his benefit jumps up to $3,168 – and the wife will collect that amount after her husband’s death. That means that as a widow, she has an additional $768 per month, and cumulatively, the couple collects about $258,303 in additional Social Security benefits.

Instead of just focusing on when to start benefits, focus on the end date as well – meaning you must take your life expectancy into account, says William Meyer, managing principal at Social Security Solutions.

Social Security Solutions, Inc. is not affiliated or connected with, or endorsed by, the Social Security Administration. Social Security Solutions, Inc. does not provide investment advice, and this information is provided for informational purposes only.

Curious what your Social Security income may be? Try out the “Social Security Retirement Income Estimator”.

Slash Spending

If you find that you’re living beyond your means, take a hard look at your housing costs. Cindy Mazzanti, age 65, retired in 2001 feeling financially secure. She had sold a valuable home in Sag Harbor, N.Y., had no debt and assumed that her husband, who is six years younger, would keep working to age 65. But just after she retired, her husband got laid off, and the couple had to dip into their savings. Mazzanti claimed her Social Security benefits early, at age 62, because “we needed the money,” she says. And though her husband has found a new job, health problems make it doubtful he’ll continue working to age 65.

Mazzanti’s solution: This year, the couple relocated from upstate New York to Sarasota, Fla. The move will slash their annual living expenses to $35,000, from $45,000, she says.

Downsizing is a good step if you see your housing costs heading beyond the boundaries of affordability, says Cindy Hounsell, president of the Women’s Institute for a Secure Retirement.

If you own your home and would like to “age in place,” a reverse mortgage allows you to borrow against your home equity, withdrawing cash that can help cover living expenses. Last year, nearly 40 percent of borrowers in the government’s reverse mortgage program were single women. But these loans come with upfront costs, and you’ll have to repay the loan if you move out of your home.

Use a reverse mortgage calculator to get an estimate of what you might be able to receive.

Another option: shared housing. Perhaps three or four of your friends could buy a house together and share expenses, Hounsell says. If your friends aren’t roommate material, go to the National Shared Housing Resource Center to find programs in your state that help match up people seeking shared living arrangements.

Putting Your Plan to Action

Careful retirement planning will benefit anyone. But due to the likelihood of a longer lifespan, it is especially important for women to have a sound retirement plan. Finding a trusted advisor is the one step in helping ensure that your retirement lives up to your expectations. The calculators presented in this article, and those in our planning and advice section, can help you get a snapshot of your retirement to discuss with your advisor. By learning how to maximize your retirement, you’ll be able to retire worry-free and enjoy the things you want to do.

By Eleanor Laise, Copyright 2016 Kiplinger’s Washington Editors

Mutual of Omaha Investor Services, Inc. is not affiliated with the author or Kiplinger’s Washington Editors


  1. Financial Finesse Reports, 2015 Gender Gap in Financial Wellness. (2015, September). Retrieved May 19, 2017, from
  2. National Institute on Retirement Security (NIRS), Shortchanged in Retirement: Continuing Challenges to Women’s Financial Future. (2016, March 1) Retrieved May 19, 2017, from
  3. Redfoot, D., Friss Feinberg, L., Smith Fitzpatrick, C. AARP Public Policy Institute. (2014, October) Retrieved May 19, 2017, from
  4. AARP Public Policy Institute and National Alliance for Caregiving (NAC). Caregiving in the U.S. (2015, June) Retrieved May 19, 2017, from
  5. Prudential Financial. Financial Experience & Behaviors Among Women. (2014, June).
  6. Retrieved May 19, 2017, from

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