4 Retirement Planning Tips for Women

4 Retirement Planning Tips for Women
Eileen St. Pierre, The Everyday Financial Planner

March is Women’s History Month. Regardless of their race, religion, or line of work, all women deserve to have a secure retirement. For many, retirement planning feels like a daunting task. Here are 4 tips to help you get started.

Pay Yourself First

Drinking coffee picAccording to the Walmart Moms Research Project, 39% prioritize saving for their children’s college over saving for their own retirement. Moms, it’s time to save for retirement first, then put any excess contributions towards saving for your children’s college educations.  While there are other ways for your kids to pay for college, you do not want your kids to have to support you in your retirement. Having your child pay some college costs will help him/her realize the value of his/her education.

Start Your Own Retirement Account

If you work, take advantage of your employer’s retirement plan. You can invest up to $1,500/month or $18,000/year (plus an additional $500/month or $6,000/year if you are age 50 and over). If your employer offers a match, invest enough to get the full match – that’s free money you are leaving on the table. If your employer does not offer a retirement plan, you can open up an IRA and put in up to $5,500/year (plus an additional $1,000 if you are over age 50).

If you are a stay-at-home Mom, you can still open up an IRA as long as your spouse has earned income. Both of you can put away $5,500/year (plus an additional $1,000 if you are over age 50).

If you are getting divorced, make sure your lawyer argues for a portion of your husband’s retirement assets. You are not automatically entitled to them. If your husband has an employer-provided retirement plan such as a pension or 401(k), your lawyer can petition for a Qualified Domestic Relations Order (QDRO) that tells the company’s plan administrator how to divide the plan assets between you and your ex-husband.

Keep a Portion Invested in Stocks

You want to make sure your retirement assets grow enough to cover all your expenses in retirement, especially if you started saving later in life. A simple yet conservative rule of thumb is to put (100-age)% in stock funds and the rest in bond funds.

  • If you are 45 years old, this means put at least 55% of your money in stocks and 45% in bonds.
  • If you got a late start towards retirement savings, you may want to invest a little more aggressively. Perhaps put (110-age)% in stocks and the rest in bonds. In the case above, our 45 year old would increase her allocation to 65% in stocks.

Understand Your Social Security Benefits

When it comes time to collect Social Security, you are entitled to the larger of: Benefits based on your own earnings record, or 50% of your husband’s benefit, even if you’ve never worked.

If you are divorced, you can claim 50% of your ex-husband’s benefit if it would be larger than what you would get based on your own earnings record. He will never know you are doing this unless you tell him. You are not required to tell him. Just remember that the following conditions need to apply:

  • You were married at least 10 years.
  • Both of you are at least age 62.
  • You will need to wait until you have been divorced for at least two years before receiving checks.

Take charge of your own retirement. Don’t rely on your husband, or anyone else, no matter how loving, to take care of you.

Visit my Retirement Planning and Financial Planning for Later in Life pages for more information.