MMM Newsletter and Website Header 10.2.15

From Charles Schwab & Co., Inc.

Americans are living longer than ever and enjoying retirements that make up almost a full quarter of their lives. That means your money will need to last longer as well — a particular challenge for women, who tend to both to retire earlier than men and outlive them, according to government data.

Add in the gender pay gap and career interruptions women are more likely to experience, and many women face a serious potential shortfall in savings. Here are some ways women can rethink their financial and investing plans to get ahead of the game.

1. Go for that promotion — and a raise

The gender wage gap may be closing, but median earnings for women working full time are still less than 80% of what men make. What’s more, women are less likely to work full time their whole careers, and therefore can miss out on opportunities to advance their careers and increase their income — which is why their retirement savings can fall short. But once the kids are independent, the equation can change. “Women in their early and mid-50s often have more time to devote to their careers,” says Kathy Jones, senior vice president at the Schwab Center for Financial Research. “Don’t be afraid to be aggressive at this stage of the game.” Go all in and gun for the promotion: That additional income and retirement savings can be a real boon.

2. Save for two, spend like one

It’s not just that women earn less; only 45% of working women participate in retirement plans, which means that many women have less saved and invested over time. Of course, smaller paychecks make it harder to save (and part-time jobs typically don’t come with retirement benefits). But keeping a flexible work schedule for a few years shouldn’t mean taking a break from saving for your retirement, Kathy says. Spouses need to plan like a team. Even if a woman earns no income for a period of time, her spouse can contribute to a spousal IRA on her behalf. Once she resumes working, a couple can keep their spending steady, socking away as much as possible of that second paycheck.

3. Don’t retire early

The longer you put off collecting Social Security, the bigger your monthly payout. For people who retire today at age 62 the maximum benefit is $2,025, while it’s $2,663 for those who are 66 (full retirement age if you were born between 1943 and 1954). And people who waited until 70, when benefits are capped, receive up to $3,501. Though women are generally younger than their spouses and may have fewer years of full-time work under their belt, 60% of female pre-retirees say their decision about when to retire will be influenced by the timing of their spouse’s retirement. But a few more years of work (and fewer years of tapping savings) could give a woman’s nest egg an extra boost. In fact, postponing retirement for four years, from age 66 to age 70, could increase her monthly retirement income by nearly $1,170.

4. Plan ahead for long-term care

At 65, women have almost 22 more years to look forward to, and 30% of them can expect to see 90. Odds are in their favor, too, that they’ll outlive their husbands. In fact, 76% of women 85 and older are widows. As a result, most women won’t have someone to help care for them if they develop a chronic disability. Indeed, 43% of women age 85 and older live alone. “Women are much more likely to need long-term care as they age,” Jones adds. “Long-term care insurance can provide a critical safety net.”

5. Boost Social Security benefits

The longer you put off collecting Social Security, the bigger your monthly payout. For people who retire today at age 62 the maximum benefit is $2,025, while it’s $2,663 for those who are 66 (full retirement age if you were born between 1943 and 1954). And people who waited until 70, when benefits are capped, receive up to $3,501. Yet the average retirement age for women is 62. If working several more years is not an option, and if your husband is older, you can file for spousal benefits at 62, and receive up to 50% of his benefit. When you reach your full retirement age, you can switch to your own benefit if it’s higher than the spousal one.

6. Consider investing a bit more in stocks

Almost half of women investors report being somewhat or very conservative in terms of their risk tolerance, compared with men, who report being less conservative, according to several recent studies. But with longer life spans, women can afford to be a little more aggressive with their investments. And with inflation steadily eating away at investors’ purchasing power, it’s critical to keep at least some money invested in equities, which have a proven track record of long-term growth. “I would argue that you need at least some exposure to equities even into your 70s,” Jones says.

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About LRPC’s Monday Morning Minute

Lawton Retirement Plan Consultants, LLC (LRPC’s) Monday Morning Minute is crafted to provide decision-maker’s with important information about the economy, investments and corporate retirement plans in a format that allows a reader to consume the information in less than 60 seconds. As an independent, objective investment adviser, LRPC has access to many sources of research and shares the best and most relevant information with its readers each week.

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Advisory (RIA) firm providing investment advisory, fiduciary compliance, employee education, vendor management and plan design services to retirement plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or bob@lawtonrpc.com or visit the firm’s website at https://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.

Additional Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.