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Four ways women can better prepare for retirement

For women to gain confidence in their financial security, it’s important to learn how to generate income before and during retirement, so you can continue to live your best life long after your working years.

According to Investopedia‡, approximately 10,000 people turn 65 years old, the standard retirement age, every day in the United States. Yet, data shows the retiring generation lacks retirement preparation and many have not saved enough, particularly women.

A recent report by the National Institute on Retirement Security‡ (NIRS) found that women are 80% more likely than men to be impoverished in retirement and on average have less savings.  In a parallel statistic, at some points in their lives, 80% of women will be in charge of both their own finances and their family’s finances, according to the Women’s Institute for a Secure Retirement‡.

Working with a professional can help alleviate financial insecurity through better preparation based on your individual goals. There are several retirement vehicles you should be aware of as you consider your retirement options:

  • 401(k) – a retirement plan offered through your employer
  • Traditional or Roth individual retirement account (IRA)
  • Pension plan
  • 403(b) – a retirement plan offered through some tax-exempt organizations
  • Social Security

In addition to reviewing specific retirement accounts, here are four key considerations to help you better prepare for retirement, including:

Generate income using assets and investments

Discuss with your financial advisor how to generate income during retirement with the money you’ve set aside for this time in your life. Your planner can help you separate your assets into three groups: taxable, tax-favored and tax-free. If you take a blended approach to meeting your required minimum distributions, your money may be more likely to last longer. Your advisor can also help you look into income-producing assets, such as rental properties, dividend stocks, or other more conservative investments like money market accounts and time deposit accounts. Having a passive way to generate income as part of your portfolio can help supplement any retirement savings you’ve built up during your working years.

Diversify your portfolio

Typical recommendations emphasize having a portfolio of assorted investments so your risk is diluted across asset types. That also means you don’t have to rely completely on conservative, income-producing investments—you may have an opportunity for more aggressive growth investments. Investopedia‡ notes that some studies show women tend to make less risky financial decisions than men, although that may be because women have less money to invest, on average, than their male counterparts. Regardless, playing it too conservative could mean a loss of opportunity over time. Adjust your rate and risk to your needs when necessary, and don’t be afraid to spend capital from your retirement portfolio if it makes sense.

Traditional IRAs, 401(k)s, 403(b)s, and self-employed plans are structured for you to withdraw from them over your lifetime. You might be nervous spending down these accounts, but a financial advisor can help you distribute these funds appropriately over the course of your retirement so you can live comfortably.

Taxes, timing, spending

These three items are the most important factors to help you create income during your retirement. You should understand your tax obligations because tax rates determine acceptable savings withdrawals. It’s also important to carefully time your retirement. The point at which you begin taking money from your retirement accounts can make a significant difference in the amount that is available several years into your retirement. It is also important to carefully time when you start receiving Social Security benefits so you can maximize that income.

Finally, it’s vital to spend wisely during this time in your life to ensure that you will have enough funds to last. Do you want to splurge on a Hawaiian vacation during your retirement? If so, plan for it in advance. Talk to your advisor about any major spending that may occur during your retirement. While you might not be on a completely fixed income, you still need to be mindful of the money that’s coming and going.

Educate

Take the time to educate yourself before and during your retirement. The better you understand what investment options and savings plans are available to you, the more opportunity you have for your money to continue to grow after retirement. Don’t be afraid to ask for help, an advisor can help suggest ways to increase your retirement savings. Start planning early so you can enjoy this time in your life, no matter what your plan to accomplish in your golden years.

You need to earn, grow and plan for the life you want, and beyond. Stay in the know with UMB and learn more about how we support Woman and Wealth.
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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

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When you click links marked with the “‡” symbol, you will leave UMB’s Web site and go to Web sites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other Web sites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.