As women, this is really something to think about because we are likely to outlive men by a few years. Generally, we don’t recommend trying to keep up with anyone when planning for retirement – it’s not a competition, you need to do what’s best for you. But women do have to consider a few things that men do not.
I mentioned that women outlive men by a few years and that’s true. The average life expectancy of a woman is actually two years longer than a man. That means that, typically, a woman will have to live off of retirement savings two years longer than a man.
That’s actually a pretty huge deal and it’s not the only problem. There’s another factor that directly affects retirement savings quite significantly. Women usually earn less than men in the same positions which means men will have more in their retirement account simply because they are male. This means that women have fewer retirement savings to begin with and have to make it last about two to three years longer than a male counterpart.
We’ve found that, in most couples, one partner is responsible for financial decisions. In a lot of cases, this is the job of the man in the relationship. I strongly recommend that couples share these responsibilities, particularly as they get older. As couples reach retirement age, it’s important to accept that, eventually, the surviving partner is going to have to manage everything. Any woman who outlives her spouse of partner has to know how to handle the retirement funds.
As I said, we generally do not recommend trying to keep up with anyone when it comes to retirement savings but it is important to tailor your retirement plan to your situation. Here are five things to talk with your financial planner about when putting together a retirement plan for you and your partner.
1. Healthcare Costs
It’s impossible to know what will happen in your retirement years as far as your health is concerned but it’s a safe bet that your healthcare costs will be more than they were when you were younger. Make sure you consider medical insurance costs and other expenses when planning your retirement.
2. Life Expectancy
Today, on average, women live to be about 88 years old and men about 86; however, most people do not expect to live this long. Of course, no one knows how long they will live but you can discuss your family medical history with your financial planner to set a more realistic goal.
3. Management Fees
Avoid things like annuities that can add multiple fees for management and investments. It’s always best to work with a firm that doesn’t earn any commission from buying and selling various financial products because then you can rest assured that they only have your best interest at heart, not their own profits. We recommend sticking with a fee-only firm and avoiding those that are fee-based.
Everything costs more over time so you should actually plan to save more than what you need to sustain your current standard of living. Look at your budget and determine what services and goods are absolutely necessary and what you can leave out. Figure out realistically how much inflation will cause those expenses to rises and plan accordingly. If you have a pension, consider whether or not it comes with a cost of living adjustment to account for inflation. Plus, keep in mind the Social Security benefits don’t always keep up with inflation, either.
5. Online Tools
While online tools are a great way to get a general idea of where you stand, they do not take the place of a CERTIFIED FINANCIAL PLANNER professional. Online calculators cannot take into consideration the small details that are unique to your situation. They do not try to determine whether you have a realistic budget, when you should begin collecting Social Security benefits, or future healthcare costs.
It’s important for both men and women to work with a financial planner to develop a realistic plan and figure out how to meet your financial goals. A financial planner is also a great resource for matching your needs with various resources and figuring out how to make the changes necessary to get where you want to be.
Any opinions are those of Thomas Fleishel and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.