Women in the Baby Boomer generation and those close to it grew up in a time when women weren’t typically considered financial decision makers. And yet, they came of age in a period of immense change, including the mass entry of women into the workforce and a consequent push for greater workplace equality with their male counterparts. The latter goal is still far from being achieved; according to the US Census Bureau, women still earn only about 78 cents for every dollar earned by men. Even so, more and more women are in or nearing retirement years, many without firm ideas or strong plans for financial independence in their later years.
But it doesn’t have to be that way. As a woman in transition from an active career to retirement, there are a few key decisions you can make today that can prepare you to enter your “second act” with more confidence, more resources, and above all, greater financial freedom.
First, let’s talk about Social Security. One of the most important decisions you will make as you approach retirement is when to begin taking your Social Security benefits. Full retirement age is 67 for those born after 1959, but according to a 2019 study by Transamerica, 55 percent of women were already planning to retire after age 65—or not at all. Nevertheless, Social Security, in some form, is likely to be an important part of your retirement income, when you finally make the decision to retire. Because of their lower lifetime earnings, women typically receive smaller Social Security benefit checks than men of the same age, which makes it even more important to time it correctly when starting to receive them. The maximum benefit is obtained by delaying payments until age 70, and for women who plan to keep working past 65, this can be an important strategic decision. Even for married women, this is important to know, because if a husband can delay receiving benefits until the maximum age, it will increase the size of the wife’s eventual survivor benefit, since statistically most women outlive their husbands. One more note on Social Security: don’t forget about your ex-spouse. If you are still single and the marriage lasted at least 10 years, you can claim an ex-spousal Social Security benefit that may be larger than the benefit you could claim on your own.
Now let’s talk about savings. Women too often defer taking care of themselves financially because they are helping out adult children or grandchildren. Here’s a piece of advice: If you’re facing a choice between funding your child’s college account or your retirement fund, put the money in your retirement fund. Why? Because long-term, that college-educated child would rather not have to take care of you in your retirement years. The best thing you can do for your children is to ensure that they don’t have to worry about your upkeep as you age. Because women typically earn less than men, they also have a harder time socking away retirement savings, but a healthy 401K or IRA is the number-one thing you can do for yourself to build your financial independence. This means budgeting, prioritizing saving by paying yourself first every month, and taking maximum advantage of the magic of tax-free compounding and growth.
Finally, it’s wise to talk to a financial advisor early and often. A certified financial planner can help you plot a blueprint that is uniquely designed for your situation, your priorities, your goals, and your needs. Once the plan is in place, your advisor can also walk beside you, serving as a well-informed traveling companion on the road to financial independence. As a woman in transition, your needs are highly individual, and you deserve someone who can listen, answer all your questions, and give you solid, evidence-based advice.
I specialize in helping women in transition take charge of their financial future. If you have questions or would like more information, please let me know. If you’d like to watch my recent interview on ABC10, “Three Steps to Take before Investing,” click here.
Stay Diversified, Stay YOUR Course!
