Women’s retirement dilemma
Many tend to be less prepared than they anticipate
BALTIMORE — When she was working and raising a family, Bonnie Bird envisioned retiring in her early 60s and traveling with her husband.
That path took a different turn after the couple divorced in 1999, and had to divide everything from their home to their savings. Bird worked with a financial planner to map out how much longer she’d need to work and how to start rebuilding her finances. She moved to North Carolina, where she’d spent her childhood and could live more affordably.
“It changed how long I felt that I had to work and how much money I need to put away,” says Bird, 66, a regional manager in technology sales who expects to work, at least part time, until age 72. “I don’t have a matching fund from a partner to pay for those living expenses. It’s important to me to continue working as long as I felt healthy doing so, so I could be comfortable and still help my children.”
Women approaching retirement often face challenges they had not counted on earlier in life. Societal shifts, including increased divorce rates, have had far-reaching implications for women and their circumstances as they age, experts say. Women also are more likely than men to trade their jobs for caregiver roles.
About twice as many women over 50 are divorced compared with 20 years ago. Women are outliving men, and women do not remarry at the same rate. Experts say women need to save a bigger chunk of their income for retirement than men because they get paid less and live longer, on average.
Studies show that only one-third of women believe they are on track for planning or saving for retirement, though the rest may not be as far behind as they think, says Katherine Bays Armstrong, a certified financial planner.
“You always worry you’re going to run out of money and be a bag lady on the street,” Armstrong says. “It’s more of an emotional thing.”
The average woman is generally not as well positioned as the average man for retirement, Armstrong says.
“Part of that is by choice,” she says. “She chose to stay out of the workforce to take care of kids or left early to take care of parents who are not well. When they get out of the workforce, not only are they not contributing to their retirement, but they have reduced earnings for Social Security.”
Women who leave the workforce early to become caregivers to elderly parents or a spouse often find themselves unprepared, lacking adequate savings and potentially without access to health insurance, says Judith Ward, senior financial planner for T. Rowe Price Investment Services.
Women going through divorce should not overlook retirement assets, she says, especially if the husband has been the primary earner saving for retirement, she says.
“Do not shortchange yourself by giving up anything,” during the settlement process, Ward says.
Women who are widows also need to know about how Social Security benefits can be affected.
For instance, if a husband and wife each received benefits based on their work histories, a surviving spouse would continue to receive only one of the benefits — the higher of the two.
“My mom and dad both had benefits based on their own work histories,” with comparable salaries, Ward says. “When my dad passed away, then my mom just received one benefit from that point forward. She was shocked that her Social Security benefit was cut in half.”
Women often don’t realize they will not continue to receive the same benefit they’d receive as part of a couple, Ward says. But it’s important to know how the system works long before applying for benefits.