Don’t Depend on Uncle Sam for HER Retirement | Valerie P. Kaiser, CFP

LWMMarchApril2015small_Page_25Twenty years ago, retirement was a time to look forward to and savor. But, today, we live in uncertain times. So, for most working adults, retirement has become very complex—requiring years of planning, a well-thought-out strategy, and a phase to be put off as much as possible.

We’re living more years in retirement.

Why? Thanks to medical advances and healthier lifestyles, people are living longer. In the early 20th century, life expectancy was 47.3 years vs. today’s life span of nearly 79 years.1 According to data from the Social Security Administration, a man who lives to 65 will live on average to age 84, while women of the same age should live to age 86.2 Or course, this is good news; but we need to be prepared for it. Company-sponsored pensions have all but become extinct so personal planning is more important than ever.

Social Security is a declining benefit.

28 percent is the share of pre-retirement income that Social Security bene ts will replace in 2030. An average earner who retired at 65 in 2002 received net benefits equal to 39 percent of pre-retirement income. By 2030, the replacement rate will have declined to 28 percent due to a scheduled increase in the Social Security Normal Retirement Age (NRA), higher Medicare deductions, and income taxes levied on Social Security bene ts. The NRA, also referred to as the full retirement age, is the age at which a worker can receive Social Security bene ts that are not reduced for early retirement.

And if you believe that Social Security will be enough to support you, think again. For retirees in 2013, if you retire at the full age of 66, our maximum monthly benefit is $2,533—not enough for many of you to live comfortably.

Women are more focused on long-term financial goals, including those relating to family. With a longer life expectancy, women generally assign
higher levels of importance to long-term  nancial goals than men. Three-quarters of women say it is very important to have enough money to
maintain their lifestyle throughout retirement versus 65% of men, for example, and 72% of women say it is very important not to outlive or spend all of their savings versus 66% of men. Meanwhile, 60% of women say it is very important to maintain a standard of living for their family in case of their own unexpected death or disability. Just 49% of men give that goal comparable.

Women preparing for retirement: plans and personal saving 

Women would be much better prepared for retirement if they earned as much as men. According to an analysis of U.S. Census Bureau data by the Employee Benefit Research Institute, at any given pay level, women are more likely to participate in a retirement plan than men. A major reason they do not have a higher participation rate overall is that they typically earn less than men: 77 cents on the dollar for full-time workers in 2008, according to the U.S. Census Bureau.

After years of lagging behind, women are now only slightly less likely than men to participate in a retirement plan: 51.0 percent versus 51.2 percent for
full-time private-sector workers ages 25 to 64 in 2008, according to an analysis of Census Bureau data by the Congressional Research Service. Personal saving and investing strategies using various financial products can help meet long term  nancial goals in addition to Social Security and retirement plans. We  nd that most of our clients prefer using a diversified approach in creating their long term strategy. Key features include: access to account values before normal retirement age, guarantees, tax deferred growth, and tax-free access. Flexibility in the plan is critical to long term success.

By Valerie P. Kaiser, CFP®
www.kaiserfinancialsolutions.com

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