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Posts Tagged ‘planning retirement’

Women & Retirement Planning: 2 Unique Challenges

Who handles the money in your household? If your home is like most, it depends on the kind of financial planning involved. A new study from UBS found that 85 percent of married women handle the day-to-day financial management in their household. However, the same survey found that only 23 percent of married are in charge of their long-term planning. The remainder defer that work to their husband.1

 

Why do so many women defer their long-term financial planning to their spouse? According to the study, 82 percent of women said they think their spouse is more knowledgeable about long-term financial planning.1

 

Partnership is always important in marriage, especially when it comes to financial planning. Finances are often a major cause of arguments and disagreements, so it’s helpful for both spouses to be involved in decision-making.

 

It’s also important for women to take control of their financial future because they may face challenges and risks that men do not face. Below are two such challenges. If you haven’t developed a long-term financial strategy, now may be the time to do so. A financial professional can help you get started.

Longevity

 

People are living longer than ever, primarily because of advances in health care and increased understanding about health and nutrition. However, women usually have the edge on men in terms of life expectancy.

 

According to the Society of Actuaries, the average 65-year-old man has a 50 percent chance of living to 87 and a 25 percent chance of living to 92. However, a 65-year-old woman has a 50 percent chance of living to 92 and a 25 percent chance of living to 96.2

 

This means that many women can expect to outlive their husbands. While that idea may not be pleasant to think about, it’s an important planning consideration. A longer lifespan means a longer retirement. That means you’ll need to make your assets and income last longer so you can live comfortably.

Career Earnings

 

Many women also may earn less over their career than their husbands or even their male counterparts in the workplace. According to a study from PayScale, a salary website, the average woman hits her peak in annual earnings at age 44. Men, on the other hand, hit their peak at age 55.3 PayScale also found that women earn less over the course of their career. The average woman has a peak annual income of $66,700. Men peak at just over $100,000.3

 

There are a number of reasons why this earnings gap exists. Some women may take time off to care for children. Others may sacrifice their career so their husbands can pursue a more demanding and time-consuming career. Others may suffer from the well-known pay gap that exists in the United States.

 

Regardless of the reason, it’s important for women to know that the earnings gap exists so they can plan accordingly. Career earnings often translates into savings. A woman who has less career earnings may also have fewer assets saved for retirement.

 

Ready to take control of your long-term financial planning? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

 

 

1https://www.thinkadvisor.com/2019/03/07/many-women-defer-to-spouses-on-big-financial-decisions-ubs/

2https://www.fidelity.com/viewpoints/retirement/longevity

3https://www.cnbc.com/2019/06/11/gender-pay-gap-womens-earnings-peak-11-years-before-mens-payscale.html

 

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

19093 – 2019/8/1

What is Your Income Floor in Retirement?

If you’re preparing for retirement, you’ve probably heard of the “retirement number.” It’s a commonly used benchmark to track retirement readiness. Essentially, it’s the amount of money you need to have saved before you retire.

 

The retirement number may not be the most effective benchmark, though. It’s a helpful target for knowing how much money you need to save before you retire. But what happens after you retire? It’s possible you may live several decades in retirement. If you spend too much money, especially in the early years, you could deplete your assets.

 

There may be another target that could help you manage your spending and protect your assets through retirement. It’s called an “income floor.” Your income floor is the minimum income you need to cover your most basic expenses and standard of living. It’s the amount you need to live comfortably.

 

The idea is to cover your income floor with sources that are guaranteed* for life, like Social Security or defined benefit pension benefits. If your basic expenses are covered, you can then use your savings to fund only your discretionary expenses, like shopping, travel, and more. In short, guaranteed* income covers your mandatory costs and your savings covers your fun spending.

How to Determine Your Income Floor

 

The first step is to estimate your income floor in retirement. A budget can be a helpful tool in this process. Start by listing all of your current expenses and then identify those that are necessary for you to maintain a comfortable standard of living. Your necessary expenses may include things like housing costs, car payments, utilities, groceries, and more. Look for those expenses that you couldn’t live without. Things like shopping or travel probably won’t make the cut.

 

Once you’ve identified your necessary expenses, estimate your current monthly spending in those categories. Will your spending change between now and retirement? For example, perhaps inflation will increase your energy or food costs. Maybe your debt costs will go down if you pay off balances before retirement. Think about how these expenses may change in the future.

 

Finally, look at steps to reduce your necessary expenses. For example, you could pay off your mortgage or even downsize to a smaller home. You and your spouse could go down to one car in retirement. Perhaps you could refinance outstanding debt to reduce your interest expense. The lower your necessary expenses, the easier it will be to cover them with guaranteed* income.

 

Tips to Fund Your Income Floor

 

There are a few ways to create guaranteed* income to cover your income floor. One is with Social Security benefits. Nearly 90% of adults over the age of 65 receive Social Security benefits.1 It’s a valuable income source for many retirees.

 

While Social Security benefits are undoubtedly helpful in retirement, they may not cover your entire income floor. The average benefit is just over $1,400 per month.1 If you have a lean budget, that may cover your full necessary expenses. However, for many retirees, Social Security only covers a portion of their budget.

 

Defined benefit pension benefits could also help you cover your income floor. However, many companies no longer offer pensions. A recent study found that only 18% of Fortune 500 companies offer pensions. That’s down from 59% in 1998.2

 

So, if Social Security doesn’t cover your income floor and you don’t have a defined benefit pension, what are your other options? One possibility is an annuity. There are a variety of different annuities that offer income that is guaranteed* for life.

 

One option is an immediate annuity. You contribute a lump sum into the annuity contract. The annuity provider then converts that lump sum into an income stream based on your life expectancy. The income is guaranteed* for life, no matter how long you live.

 

Another option is a deferred annuity with a guaranteed* withdrawal rider. Again, you contribute a lump sum into the contract. Your funds have the opportunity to grow over time. However, you also have the ability to withdraw a certain amount per year. As long as you stay within the withdrawal limits, your income is guaranteed* for life.

 

Ready to develop a strategy to fund your income floor? Let’s talk about it. Contact us today at Retirement Peace Project. We can help provide further education on  estimating your income floor amount and creating a plan. Let’s connect soon and start the conversation.

 

 

1https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

2https://www.planadviser.com/mere-16-fortune-500-companies-offer-db-plan/

 

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

 

19006 – 2019/6/27

Check These 3 Items Off Your Planning List Before You Retire

 


 

Trying to decide when to retire? It’s a question that every worker faces at some point. In some cases your decision is made for you, because of health issues or employer restructurings. In an ideal world, however, you would get to retire at the time that’s right for you. There’s no universal correct answer on when that time is. It should be based on your unique needs, goals and objectives.

It may be helpful to think about what you need to complete before you retire. For example, you may want to save a certain amount of assets. Or you may want to reach full retirement age (FRA) for Social Security. Maybe you have stock options or other employer benefits that need to vest before you leave the working world.

There are also planning items you can use to minimize risk and improve your odds for success. Below are three such items. If you’re thinking about retirement but haven’t completed these items, now may be the time to do so. A financial professional can help you complete your planning so you can enter retirement with confidence.

Develop your retirement budget.

Are you one of the 60 percent of Americans who don’t use a budget?1 If so, retirement is the perfect time to make a change. A budget is one of the most effective financial tools available because it helps you make informed purchasing decisions and stay on track to reach your goals.

A budget is especially important as you enter retirement. One of the biggest risks in the early years of retirement is that you spend too much and deplete your assets too quickly. That could lead to you not having enough money in the later years of retirement. A budget can minimize this risk.

You can’t predict every expense you’ll face in retirement, but you can make estimates based on your current spending and your desired lifestyle. Also, be sure to include inflation in your budget. Your cost of living is likely to increase over time.

Map out your retirement income.

Where will your income come from in retirement? If you’re like most retirees, you’ll receive Social Security benefits. You also may receive a pension or some other type of income. And you’ll likely need to take distributions from your 401(k) plan, IRA or other retirement accounts.

Take some time to project your income. The Social Security Administration can provide you with benefit estimates, and your company’s human resources department should be able to provide estimated pension payments. A financial professional can help you determine a reasonable distribution amount to take from your savings each year. You also may want to consider an annuity, which can generate guaranteed* lifetime income.

Minimize your risk exposure.

Life can be unpredictable, and it’s possible that your retirement may not go according to plan. For instance, you or your spouse may develop a condition such as Alzheimer’s that requires long-term care. The financial markets could suffer a downturn that limits your ability to draw income. Your health care costs could be greater than expected.

A financial professional can help you develop strategies to minimize your exposure to risk. For example, you may want to consider long-term care insurance. An annuity could be a helpful tool to guarantee* your income and minimize downside risk. These steps and more could help you avoid dangerous threats that could sink your retirement.

Ready to implement your retirement strategy? Let’s talk about it. Contact us at Retirement Peace Project. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.

 

1https://money.cnn.com/2016/10/24/pf/financial-mistake-budget/index.html

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

17848 – 2018/7/30