Women and retirement: What you need to know

Women face unique challenges when preparing for retirement, from longer lifespans to income inequality and employment impacts from family caregiving. Considering these realities, women should prioritize early retirement planning and investment strategies to ensure financial security in their later years.

Longer lives, lower earnings

Statistically, women have a longer lifespan than men, which translates to additional years spent in retirement. Women age 65 or older can anticipate living until age 87, compared to age 84 for men. Income inequality further complicates retirement planning for women, with the average woman earning just 83 cents to every dollar earned by men. Career interruptions are another factor that disproportionately affects women, often due to caregiving duties for children or elderly family members. Breaks from employment can have a substantial impact on overall earnings and the accumulation of retirement benefits.

How much income will you need?

A fundamental aspect of retirement planning revolves around determining the amount you need to save. It is recommended to plan for about 80% of your current annual income. If you plan to travel during retirement, allocate additional funds for anticipated trips. Another expense during retirement is the cost of medical expenses including monthly Medicare Part B premiums of $174.70, the 20% co-payment for medical services and a $240 annual deductible.

To calculate the total retirement amount needed, these annual expenses should be multiplied by the estimated number of years in retirement. To do this, you need to estimate how long you will live. On average a 65-year-old woman is expected to live until around age 87. When estimating life expectancy, consider the lifespans of your parents and grandparents. At the very least, it is helpful to plan for at least 25 years of retirement.

Calculating your benefits

For women, understanding Social Security benefits is crucial. Social Security benefits are a critical source of income for many women, with 42% relying on it for more than half of their total income. Everyone should set up a My Social Security account to verify the expected benefits upon retirement.

Spousal benefits are available to lower-earning spouses, including those in same-sex marriages, contingent upon the higher-earning spouse initiating their benefit collection. At the full retirement age, the lower-earning spouse is entitled to a spousal benefit that is 50% of the higher earner’s full retirement benefit. If you’re divorced and age 62 or older, you can receive benefits based on your ex-spouse’s work record if you meet several conditions including: you were married at least 10 years, are not currently married, your Social Security benefit is less than what you would receive based on your ex-spouse’s work record even if they are deceased. A widow can claim survivor benefits at their full retirement age, receiving 100% of the benefit their late spouse was receiving or eligible for. For more information, check out Social Security’s webpage just for women (https://www.ssa.gov/people/women/) and their publication “What Every Woman Should Know” (search “What Every Woman Should Know SSA”).

To encourage women to plan for their retirement, AARP has created several helpful tools. AARP recently launched their "We Say Save It” campaign to educate women about saving more for retirement. AARP also sponsored the publication of “The Single Woman's Guide to Retirement” by Jan Cullinane. AARP also offers free tools for savings including a retirement calculator (www.aarp.org/retirement/retirement-calculator/) and a Money Map Tool https://moneymap.aarp.org/.

Teresa Holt is the AARP Alaska State Director. The information provided is for general guidance. Consult a financial advisor for personalized recommendations.

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