Monday, May 16, 2011

Social Security just made it harder for women to plan for retirement

Forty-something women with husbands, teenage kids and a full-time job have little time to think about the long-term, to visualize life after 60 or to make a retirement plan that will generate income into their 80s and 90s. Unfortunately, that's exactly what 40-year-old women should be doing as we have said many times at
Now we learn that the Social Security Administration is going to make it just a bit harder for women to do that essential planning. That's because as a money-saving measure ($1 billion over the next 10 years), the federal agency recently announced that it will no longer send out those printed annual reports via the U.S. Postal Service telling us what benefits we can expect to receive when we retire. You know the ones that say if you retire at age 62, you can expect to receive XXX in monthly benefits, or if you wait until 67, your monthly benefits increase to XXX.
Of course we can go to and dig into this personal information. But women I know --- especially those buried in work and family -- have little time to spare for that time-consuming exercise. So more of us will fail to get a grip on retirement planning because we don't have time to think about it. Out of sight, out of mind, right?
However, finding out what Social Security will send you in benefits is an important first step in planning.(Please don't use the excuse that you'll never retire as a way to not deal with this. Believe me, it will happen whether you want to or not. Many employers "are lukewarm toward retaining older workers due to concerns that they cost too much, lack current skills, and don’t plan to stick around long," says a report from the Center for Retirement Research at Boston College. We know what the recession has done to many older workers. )
Once you've got the basic information on benefits, you can determine from where additional retirement income will come. The agency does offer a free booklet called "What Every woman Should Know" with answers to questions about benefits.
At age 40 here's what women should be asking:
1. What can I expect to receive in benefits from Social Security and at what age?
2. What benefits will my husband receive and at what age?
3. If my husband dies what can I expect in terms of retirement income from a 401(k) savings plan, his pension or401(k) or investments?
4. If our marriage ends because of divorce what will I have in terms of retirement income on my own?
5. Will our house mortgage be paid off when we retire? If not, how will we deal with that debt? What if I end up on my own... can I afford the mortgage payment?
6. Roughly what kind of household budget will we have in retirement? What would my budget look like if I'm on my own?
Few if any of my women friends thought about this stuff in their 40s. I certainly didn't. Yes, I was putting money into my company's 401(k) plan, I invested savings independently in a stock mutual fund, I built on small gifts of stock my mother gave me for my birthday including the 10 shares of IBM she blessed me with on my 40th birthday. Thanks mom. But I did NOT think about my 60s, what life would be like. I especially didn't think about what life would be like without a spouse, which is exactly what happened six months after my 60th birthday when he walked.
In my 40s I said to myself that saving money for the long-term was not going to get in the way of enjoying life as I knew it.... with travel, building a vacation home or visiting relatives. Money was not going to be the center of my universe. It should have been. I would be way less uncomfortable making money and saving and issue in my relationship with my now ex-husband.
I now regret not putting more money into long-term savings, investing more in my 401(k) and being more aggressive about managing my investments. Having said that the point of this message is that women do have the power to save and plan for the long-term with or without a spouse.
Here's how.
1. Talk regularly with your husband about long-range retirement planning. Make sure you are on the same page in terms of knowing what it will take to ease into retirement at 66 or 67 when you can collect the full amount in Social Security benefits.
2. Discuss what life would be like for you, if your husband is gone.
3. Make sure in setting up pension benefit plans that you agree that a surviving spouse should receive continued pension program support even if one of you dies.
4. Rough out a household budget in retirement...factoring in mortgage payments, other debts. Is there a way to reduce that debt before you retire by paying off the mortgage etc.
5. Set some investment goals for your long-term savings. Is your 401(k) performing as it should? If not, can you make changes? Visit those goals and that performance every six months. Don't let money sit there doing nothing. Don't let management fees eat into your annual return. And get started by taking the time to visit to find out what those benefits will be for you in retirement.
The Center for Retirement Research at Boston College offers a clever and informative "Social Security Claiming Guide" for those wishing to get started on retirement planning. The authors describe the information as "a guide to the most important financial decision you’ll likely make." They said thinking long-term about what's at stake "is nothing less than planning the financial well-being of you and your spouse for the rest of your lives." Do we have time to do this essential planning and keep at it as we approach retirement age? We'd better make time!
For more on older workers:
The Columbian newspaper, click here.
Recessions, wealth destruction and the timing of retirement," by Barry Bosworth.

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