Sponsored by Great West Financial
When it comes to funding retirement, women face a double challenge. With life expectancies that are about five years longer than those of men,[1] they have more years to cover -- but less savings to do so. In fact, women lag behind men in retirement savings by a whopping 34%, according to the National Institute on Retirement Security.[2] This troubling situation is due largely to the persistent pay gap: Women earn about 80 cents for every dollar men earn. [3] Lower incomes also mean that women 65 and older receive lower Social Security payments -- an average of $13,150 a year, compared with $17,106 for men.[4]
But your women clients also have some important strengths: They are diligent savers and tend to stick to their retirement savings plan even during market swings. At nearly every income level, they are more likely to join an employer's retirement plan. In one study, 82% of women earning $50,000 to $74,999 participated in their employer's plan, compared with just 63% of men in the same income group.[5] What's more, women contribute to their retirement plans at rates that are 6% to 12% higher than those of men. Clearly, women have the discipline to close the retirement savings gap. Here's how you can help them make the right moves to improve their outlook:
Encourage women clients to work longer
Working as long as possible helps your client add to her retirement accounts and avoid drawing down her savings. She may also boost her eventual Social Security benefit and enjoy more years of employer-sponsored health insurance. Run the numbers with your client so that she understands how delaying retirement for just a few years can increase her future standard of living and help ensure she doesn't outlive her assets.
Help clients catch up on savings
Starting at age 50, your clients can contribute an extra $1,000 a year to their Individual Retirement Accounts (IRAs) and an extra $6,000 to their 401(k) plans. It may not sound like much, but show your client the math: If she puts away $7,000 extra a year until age 70 and her money earns a 7% return, she'll amass more than $300,000 in extra savings.[6] Married women who are not working can make catch-up contributions to a spousal IRA.
Make the most of clients' Social Security benefits
Women can reduce the risk of outliving their savings by maximizing Social Security benefits. Many women claim their benefit early, slashing the amount they’ll receive over their lifetime. Instead, encourage your client to consider delaying past full retirement age, which is set by the Social Security Administration at 67 for people born after 1959.[7] Doing so can boost retirement benefits by 8% each year until age 70.[8] Of course, there are many claiming strategies, so it's important to go through the options carefully with your clients and determine which one is appropriate. For instance, for a woman who spent many years out of the workforce, the 50% spousal benefit may yield a higher income than claiming her own benefit.
Build opportunity for growth into your clients' plans
It may be tempting for your women clients to keep the bulk of their savings in conservative investments such as bond funds. However, it's critical that these clients keep their savings growing faster than inflation, which may involve investing a portion of their retirement portfolio in growth investments such as equity mutual funds.
In addition to guaranteed income sources such as Social Security and pensions, your women clients may want to consider income annuities that pay reliable monthly benefits no matter what the markets do. Clients in their 50s or 60s can invest in a deferred income annuity and receive a guaranteed income stream that starts in 10 or 20 years.[9]
Talk to your client about long-term care
More than 67% of nursing home residents are women and almost two-thirds of home care recipients are women, according to AARP's Public Policy Institute.[10] That makes long-term care insurance a safety net worth consideration for your women clients. Policies can be expensive, but you can help clients trim the cost by opting for a longer waiting period before benefits begin or a shorter coverage period. With careful planning, you can give your women clients their best chance at achieving a worry-free retirement
[1] Social Security Administration, 2016 Trustees Report (www.ssa.gov)
[2] National Institute on Retirement Security, March 2016 (www.nirsonline.org); Vanguard, "How America Saves 2016," (institutional.vanguard.com)
[3] U.S. Census Bureau, Current Population Survey, 1961 to 2016 Annual Social and Economic Supplements (www.census.gov)
[4] Social Security Administration, November 2016 (www.ssa.gov)
[5] Vanguard How America Saves 2016 (institutional.vanguard.com)
[6] Compound interest calculator, Bankrate, 2017 (www.bankrate.com)
[7] Social Security Administration, 2017 (www.ssa.gov)
[8] Social Security Administration, 2017 (www.ssa.gov)
[9] Any guarantees are subject to the terms and conditions of the contract and the claims-paying ability of the insurer
[10] AARP Public Policy Institute, April 2017 (www.aarp.org)
