We all know that women live longer than men. If you’re a woman, you’ll live, on average, six to eight years longer than men. Because you’ll live longer, planning for your retirement is particularly important. Creating financial security for women in retirement requires planning ahead. Here are just a few important ways you can plan ahead to achieve financial security in retirement.
Think About Your Ideal Retirement
Retirement means many different things to different people. Is it a house near a beach in Hawaii? Is it two apartments, one on each coast, so that you can spend more time with your kids and your grandchildren? Is it lots of travel, to exotic destinations around the world? What does a happy retirement look like to you? If you think today about what you’d like your retirement to look like tomorrow, you’ll be able to develop a plan that will give you the best chance of making it a reality.
Find an Advisor
An advisor can help you make smart decisions that will ensure you’ll have a secure retirement. Working with an advisor who specializes in building financial security for women can help you create an effective plan to reach your goals. Approach the process of finding an advisor like you would picking a doctor or other trusted professional. It’s not something you should take lightly. Unfortunately, people often end up with an advisor who approached them socially, or who was referred to them by a relative, friend, or colleague.
You should find an advisor who meets some important objective criteria (fiduciary, independent, fee-only, credentialed, and experienced), whom you trust, and with whom you have a good personal rapport. If you’re unsure where to start your search, consider the websites for the National Association of Personal Financial Advisors, the Financial Planning Association, or the CFP Board.
Want to learn more about retirement planning? Contact our team at Springwater Wealth today to learn how we can help you develop a plan for your financial future.
Build Yourself a Budget
Because you’re likely to live a long life, your living expenses will have the biggest impact on the success rate of your retirement plan. To achieve financial security for women, it is important to create a plan and make a spending projection for retirement. Where should you start?
A good place to start is understanding what you’re spending now. Today, you have both fixed expenses and variable ones. Fixed expenses are things that don’t vary much, if at all, from month to month, while variable expenses are things that you can pretty easily put off for a while, or skip completely.
How will today’s expenses change when you’re retired? You’ll probably spend a lot less on some things, and a bit or a lot more on others. Will your overall spending decrease, stay the same, or go up when you’re retired?
One thing to keep in mind is that every dollar you don’t spend today will be a dollar that you’ll be able to spend in retirement. So, if you’re really looking forward to your retirement and the opportunity to travel, spend time with your family and friends, or give back to your community, think about how you can reduce your spending today, and save more for tomorrow.
Understand Social Security and Your Benefits
Social Security benefits are an important resource for creating financial security for women, as they account for nearly half of a woman’s retirement income, on average.
You can take your Social Security retirement benefits as early as age 62. However, your full retirement age (“FRA”) benefit is the age at which your benefits are unreduced. That age depends on when you were born. You can determine your FRA by looking on the SSA website. If you take benefits before your FRA, they will be reduced. Alternatively, if you wait to take them, they will be increased. You can wait up to age 70 before taking your retirement benefits.
Since you can receive a higher benefit by waiting, why would you ever take your benefit early? Well, not everyone has the financial resources available to provide income in retirement before their delayed Social Security benefits begin. And some people recognize that their cumulative lifetime benefits will be lower if they claim early, but for a variety of reasons they’d like to have the income now.
Whatever your preference, you can plan ahead to achieve financial security in retirement by understanding Social Security and your benefits, and knowing when you should claim them.
Peace of Mind
If you’re like most women, you don’t want to be a burden on your family as you get older. Fortunately, there are things you can do today to ensure that you achieve financial security in retirement without having to rely on family.
First, make sure you have a good estate plan in place today. An estate plan consists of a will, a power of attorney, a health directive, and possibly a trust. Your estate plan will ensure that your wishes are carried out if you’re ever unable to make decisions for yourself. An estate plan is a crucial element of financial security for women in retirement, so don’t neglect this step.
Also, if you have a family history of health issues later in life, you may want to consider buying long-term care insurance (“LTCI”), particularly if those family health issues are cognitive or memory-related. Long-term care insurance will reimburse you a daily amount for services to assist you with certain predefined “activities of daily living.” The cost of care has increased faster than overall inflation, and LTCI can help you pay for that care if you think you’ll need it.