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Why Women Face a Retirement Crisis

By Liz Pulliam Weston (excerpted for length)

www.moneycentral.com

 

Women are living longer than ever and spending more years in retirement. That means many of us must face some tough realities.

We're living longer. Isn't that great? Then why are retirement experts so worried?

Perhaps because longer lives translate into longer retirements, and we're not doing a great job of saving enough money to last those extended lifetimes.

The issue is important for men, but it's critical for women. Among the reasons:

We live longer. The average life expectancy for a newborn girl in the U.S. is now just a hair under 80 (79.9, to be exact), according to the Centers for Disease Control, which tracks these things. For baby boys, it's 74.5, or about five years less.

More to the point, the time we spend in retirement is longer. At age 65, a woman's life expectancy is another 19.5 years. A man's is 16.6.

But you shouldn't expect the lights to go out on your 85th birthday. Demographers predict a lot more of us who are alive today will survive into our 90s or even later. (If you're curious about your own life expectancy, check out our calculator.) Given that the median retirement age is 61 for women, many of us should be planning on a 30-year retirement -- or even longer.

We're more likely to suffer job interruptions and other income setbacks. The typical man retiring in 2000 had 44 years in the workforce, according to the Social Security Administration. The typical woman had worked 32 years. Fewer working years means less opportunity to save for retirement and build Social Security benefits.


It's not just that we take time off to have and raise kids. We're also more likely to interrupt our work lives to care for sick parents or other relatives. Seven out of 10 unpaid caregivers are women, according to AARP, and more than 50% of caregivers make changes at work to accommodate their patients' needs. Those accommodations may include working different hours, working fewer hours or taking unpaid leaves of absence. It's hard to vie for promotions and income-boosting overtime when you need to get home to bathe and feed your ailing mother.

We earn less. Yes, the gap is shrinking, but the median income for full-time working women in 2001 was $30,420, compared to $40,136 for men. Average Social Security checks for men and women show the gap in working years and income: Men got a median amount of $1,008 a month. Women got $774.

We're probably going to die alone. Sorry, but that's the grim reality. Those of us who don't divorce are still likely to outlive our husbands. If he's substantially older than you, you could spend literally decades as a widow. You're going to need to know how to manage your money and to make sure you have enough to get you to the finish line.

We're much more likely to retire into poverty. Women overall are 71% more likely than men to live below the poverty line in retirement. When you compare unmarried women (divorced, widowed, never married) to married couples, the statistics are more shocking: Single women are four times more likely than couples to live in poverty.

We're probably not saving enough -- when we're saving at all. Survey after survey shows us lagging behind men in saving for retirement. We're less likely to be saving currently (53% of us compared to 62% of men, in the most recent study by the Employee Benefit Research Institute), less likely to be participants in a 401(k) or other retirement workplace plan (37%, compared to 41%) or to have an IRA or other retirement account outside work (37%, compared to 46%).

Take charge of your future
Here are other things women need to keep in mind:
 

Make retirement savings a priority. If you're dreaming, however subconsciously, that you'll be bailed out by Prince Charming or a lottery ticket, you need to wake up and smell the espresso. (Read Barbara Stanny's terrific book, "Prince Charming Isn't Coming: How Women Get Smart About Money," if you need more convincing.)

What may be even more likely is that you have good intentions, but other spending keeps getting in the way. I see this a lot in parents, who are determined to provide the best for their kids while letting their retirement savings slide. Do your kids a favor: Save enough so that you're not such a burden to them in your old age.


Take advantage of your 401(k) and other retirement savings options. As I wrote in "7 common 401(k) blunders," there's no excuse for not contributing if you're eligible. And you should do your best to contribute enough to get the full company match. You can supplement that savings by tossing money into an IRA or Roth IRA (which is also a good option if you're not covered by a workplace plan). You also can save on your own, in a taxable account.


Keep your hand in. You may well want to take time off for your kids or your parents. Just don't stay out of the work world too long. Every year you don't work can rob you of an opportunity to contribute to retirement plans and potentially lower your future Social Security check. (Full-time homemakers should take other steps to protect their financial futures.


Get educated about money. Once you're retired, you're playing for keeps. If you make a mistake with your money, you're much less likely to be able to recover than during your working years. Get comfortable managing your money well before you retire, and consider occasional check-ups with an experienced, objective, fee-only planner.

 

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