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Savings for retirement in a jar

Women pay inequality gap follows them into retirement

If you are a woman in the workplace, you know what “women pay inequality” means: You need to work over 3 more months to earn what your man did last year. Sounds unfair?

Savings for retirement in a jar

According to a report from the White House, full-time working women earn 23% less than their male counterparts. Translated to working days, it equals to approximately 60 business days or three months into each year. Well, as you know, I’m no young chick, and if you are getting near or into your retirement years, the horror doesn’t stop there. If you earn less, you have fewer options to save, with a greater impact in your golden years and into retirement.

In addition, and to make an even gloomier panorama, in all developed countries and most undeveloped ones, women live longer than men. As a group, women outlive men, sometimes as much as 10 years.

In 2011 life expectancy was 78.7 years In the United States, which is slightly below the Organisation for Economic Co-operation and Development (OECD) average of 80.1. The OECD is an international organization that promotes policies that will improve the economic and social well-being of people around the world. Their members include the most advance countries in the world and some so-called “emerging” economies such as Chile, Mexico and Turkey.

Men in the USA expect to live an average of 76 years, while women reach 81 in life expectancy. Although the gap has been closing in in recent decades, gender discrepancy is most pronounced in the very old: among centenarians worldwide, women outnumber men nine to one.

So how does a woman who lives to 90 or 95 years old stretch her already meager savings?

A December report by the Employee Benefit Research Institute found that “the current median in a 401(k) savings account is just about $18,000.” The median retirement income for women in 2010 was just 59 percent that of men, according to the U.S. Government Accountability Office..

For many women, gender inequality doesn’t end at the workplace but it follows them into their retirement years. In fact, women are almost twice as likely as men to live below the poverty line during retirement, with single and minority women struggling the most.

In your view, it this fair? What can be done to solve the gap and help women live a decent retirement life?

 

Try this Calculator: Will you have enough to retire?

 

LIFE BELOW THE POVERTY LINE

Population Male poverty rate Female poverty rate
All 65 and older 6.6% 11%
Married 4.7% 4.9%
Widowed 10.1% 14.5%
Divorced 12.2% 17.1%
Separated 10.8% 35.4%
Never married 15.7% 23.2%
White 4.6% 8.6%
Black 13.2% 21.3%
Asian 11.6% 11.9%
Hispanic 19.1% 21.8%

Source: GAO analysis of Census data for 2012

 

Early retirement forced to retire

4 Steps to deal with sudden retirement when forced to retire early

 Welcome to our new wealth coach and contributor Aquiles Larrea Jr.! Aquiles specializes in coaching entrepreneurs and business owners as well as working Latinas and Latinos who’d like to plan their present and enjoy their future.

Early retirement forced to retire

 

What if you are laid off or forced into early retirement before 65, or even before 60? If that happens to you, what do you do in response to the next phase of your life starting sooner than you planned? Here are some steps you might want to consider if this sudden situation happens to you.

  1. Gauge where you stand financially

It could be that the full-time job you just left will be your last. It could be that you have been thinking seriously about retirement. Depending on your outlook, you may see your glass as half-empty or half-full – but no matter your outlook, you need to assess your financial position.

With no income from work, your household will be more reliant on your spouse’s income or savings (assuming you are married at the time). So how big is your emergency fund? Is your cash position strong enough so that you can lean on it for a while until you decide how much you want or need to keep working?

Do you want (or need) another full-time job? Do you see yourself transitioning into part-time work? Or are you looking forward to retirement? Regardless of your employment prospects, you will have to calculate the amount of income you receive (or can potentially receive) from other sources – the pension or termination payout you were (hopefully) given, your investments, and other sources of passive income.

If that income doesn’t appear to be enough, should you apply for collecting Social Security as soon as you can? Many financial professionals will tell you no, and here is why: for each year you delay filing for Social Security benefits, your benefits grow by about 8% (from age 62 to age 70). If you were born in 1954 and you file for Social Security benefits at 62 in 2016, you will reduce your monthly Social Security benefit by 25 percent as a consequence.1,2

On the other hand, some people really need the money and/or are in poor health, so they would rather have the income sooner than later. Your projected lifetime Social Security benefit remains the same regardless of the date you first file for benefits, so even healthy retirees sometimes sign up as early as they can. In fact, in a June survey of more than 600 retirees taken by the Nationwide Retirement Institute, 76% of Americans who had been retired less than 10 years and 68% of Americans who had been retired 10 years or longer said that looking back, they felt they applied for Social Security at the right time.1

Nevertheless, a time like this is a great time to examine Social Security claiming strategies with help from a financial professional –especially if you are married or have been married. The wrong move could leave a great deal of money on the table.

  1. Can you take advantage of any benefits as you leave work?

Talk to the HR officer. If you have not been informed of your eligibility for severance pay or an early retirement package, ask about it. Depending on the circumstances of your exit, you may also qualify for Social Security disability benefits or unemployment benefits.

It will not be cheap to secure health insurance if you need it. If you are lucky, you worked for a big company, giving you COBRA eligibility. Maybe you are even luckier – perhaps your employer offered you the option of retiree health benefits when you were hired. (Hopefully, that offer still stands.) 

Early retirement planning

  1. See what you can do to reduce spending and taxes

Leaving work early might mean that your retirement is longer than anticipated. This calls for a reassessment of your retirement income strategy and your probable retirement expenses, including your day-to-day spending habits.

What fixed expenses are non-negotiable? What can you trim? If you are married, you and your spouse should be on the same page regarding how much you spend and what you spend money on. Perhaps gifts to children or grandchildren should be ceased. Maybe you could sell the house and move someplace cheaper. Maybe just one car is enough. You could eat out less. Spending less on mere wants is appropriate in your situation.

Every tax dollar you can save is a dollar back in your wallet. So pay attention to investment location and the impact of taxes on your portfolio, as you may be deriving income from investment accounts.

  1. Stay positive

You may not have left work on your own terms, but you have an opportunity in your hands –the chance to change, and perhaps even reconceive the way you live and work from this moment forward. If you have significant retirement savings, you may even be surprised at the potential your future holds.

 

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – cnbc.com/2015/09/23/when-you-should-file-for-social-security-benefits.html [9/23/15]

2 – ssa.gov/retire2/retirechart.htm [10/22/15]