4 Questions Every Woman Should Ask to Prepare for Retirement

According to the US Census Bureau, 80% of women outlive their male counterparts. This staggering number has been a constant in longevity studies for centuries, yet not much has changed when it comes to women factoring this reality into their retirement planning.

Put simply, if women live longer than men, then their assets should too.

Some of the contributing factors that make women less prepared for retirement than their male counterparts are quite shocking. According to a study conducted by the Transamerica Center for Retirement Studies, only 70% of women use a 401k (or similar plan) to save for retirement. The percentage of men, on the other hand, is 81%.

Add this statistic to the fact that many women make less than their male counterparts over their lifetimes, with a large number also taking time off during their careers to raise their children.

And the list goes on. The good news is women can start taking charge of their retirement strategies now. 

Here are the four key questions every woman should ask to prepare for retirement.

What retirement benefits does your employer offer?

Employment-sponsored retirement plans offer benefits that are as robust as ever. Unfortunately, not everyone knows what they are, or how to find them. Some people just expect their benefits to magically “kick in” when they retire. This isn’t always the case. 

For women, it’s important to know the right questions to ask employers before retiring. 

Here are some to consider:

  • Does the company offer a retirement plan?
  • Is there a vesting schedule? If so, what are the details? 
  • Do you have a tax-deferred savings plan such as a 401(k) or a 403(b)? Present value?
  • Do you have a defined benefit or contribution plan that will offer income? How much?

It’s essential that you take a proactive role in your retirement strategy. Don’t wait for others to tell you what the next step is or who to talk to. Consider yourself the project manager for your retirement and ask the right questions.

What will your social security benefits be? 

It’s safe to say that most people know where Social Security comes from, and what it’s for. This government-sponsored retirement benefit has been around for over eighty years, providing income to millions of Americans. 

But did you know that you have options when it comes to when, where, and how much of a benefit you will receive?

According to the Social Security Administration, there are some things that every woman should know about:

Nothing keeps you from getting your own S.S. benefit.

  • As long as you worked and paid taxes for 10 years, and earned at least 40 work credits, you should be able to qualify.
  • Once you reach 62, you may be eligible for your own Social Security benefit – whether you’re married or not – and whether your spouse collects Social Security or not.
  • If you become disabled before your full retirement age, you might qualify for Social Security disability benefits, if you worked and paid Social Security taxes in five of the last 10 years.
  • If you also get a pension from a job where you didn’t pay Social Security taxes (e.g., a civil service or teacher’s pension), your Social Security benefit might be reduced.

There is no marriage penalty or limit to benefits paid to a married couple.

  • If you are married and you and your spouse worked and earned enough credits individually, you each get your own Social Security benefit.
  • A working woman is not limited to one-half of her spouse’s Social Security. (That rate applies to women who never worked outside the home.)

If you’re due two benefits, you get the higher rate of the two, not both.

  • A wife is eligible for between one-third and one-half of her spouse’s Social Security benefit, (if you don’t have your own work record).
  • Most working women who reach retirement age receive their own Social Security benefit amount because it’s more than one-third to one-half of their spouse’s rate.
  • If your spouse dies before you, you can apply for the higher widow’s rate. 

If you’re divorced and were married at least 10 years, you’re eligible on your ex’s Social Security record.

  • Divorced women who were married at least 10 years are eligible for Social Security based on their ex’s record if they are unmarried when they become eligible for Social Security.
  • Some women sign a divorce decree, which relinquishes their rights to benefits on their ex’s record. Those clauses in divorce decrees are never enforced.
  • Any benefits paid to a divorced spouse DO NOT reduce payments made to the ex.

When your spouse (or ex) dies, you’re probably due a widow’s benefit.

  • A widow is eligible for between 71 percent (at age 60) and 100 percent (at full retirement age) of what the spouse was getting before they died.
  • You will receive your own retirement benefit first, then supplement it with whatever extra benefits you are due as a widow, to bring your Social Security benefit amount up to the widow’s rate.

How do I prepare for the Widow’s Penalty?

I need to include a caveat to the information about the widow’s social security benefit. While social security does include provisions for a widow, you should know about the widow’s penalty as well.

The Widow’s Penalty refers to the negative financial impact of a spouse’s death. Knowing and understanding the impact of a spouse’s death is essential to a solid retirement strategy. The widow’s penalty is all about preparing for the expected. So take the steps now to lessen the blow when the sad event of a spouse’s death occurs. I have an article detailing ways to prepare for the widow’s penalty that gives further details about what you should address. But areas that a spouse’s death can impact are things like:

  • Changes to your tax filing status
  • Reduction of your social security benefits
  • Assets stuck in probate
  • Knowing beneficiaries listed on accounts

Unfortunately, the death of a spouse can take it’s toil in many areas of our lives, it’s best to plan ahead to assuage the pain wherever we can.

Who’s on your “team?”

As I stated earlier, 80% of women will outlive their male counterparts. Unfortunately, many of them aren’t piloting their financial ship until their spouse passes away. 

If you would like to avoid this extremely avoidable pitfall, it’s important to know who’s on your retirement team. If you are unsure of who is on your team, a good place to start is to identify your “go-to” resources for the following topics:

  • Medicare: Who can tell you the ins and outs of the program; which plans suit your needs? 
  • Social Security Benefits: When to take benefits; how much will you get?
  • Long Term Care: What’s the plan for you (and your assets) if you get sick?
  • Investment and Wealth Protection: Who manages your investments? Who helps you assess market risks and changes?
  • Estate Planning: Who will receive your assets and handle your responsibilities after your death or incapacitation. How to minimize estate tax, gift tax, income tax, probate?

If you had a hard time identifying these resources, or if you found yourself with a handful of names and numbers, you might want to consider consolidating your resources. 

The reason for this is simple: you want your team to have a shared knowledge of your overall plan. If you have a different team (or person) working on every element of your retirement, you run the risk of your plan becoming disjointed. Each individual specialist may think their solution is the best, but unfortunately, their scope is limited to what they are licensed to sell, rather than looking at your entire strategy. That’s where firms like ours are different. We have a specialist for all of these things too, but we all work as a team – with your best interest in mind.

The Takeaway 

The key to any successful plan is to be strategic. This includes identifying any potential obstacles along the way that may interfere with your objective and clearly outlining your goals before making any moves. I know it can be overwhelming (for anyone!) to be in the captain’s seat. But don’t worry, help is out there, you just have to know where to look. 

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