Women in their fifties are often going through a number of transitions at the same time: moving from an active career toward retirement; shifting from parenting toward the “empty nest” years; transferring their energies from caring for children to caring for older parents; and for some, making the journey from marriage into the single life, either because of death or divorce.
All these are reasons why women in their fifties should be paying attention to their financial planning, especially looking toward retirement. Statistically, women in this age bracket will outlive their male counterparts by almost four years, according to the Social Security Administration. This means that they will require more assets to maintain their desired retirement lifestyle, not to mention the statistically higher likelihood that they will spend more on medical or long-term care in retirement than men of the same age.
So what can women in transition do to prepare? Here are four important ways for women in their fifties and beyond to boost retirement savings during what are likely their prime earning years.
- Take advantage of the catch-up provisions for retirement account contributions. Persons age 50 and older are allowed to contribute an extra $1,000 (above the standard contribution of $6,000) to IRAs and an extra $6,500 (above the standard contribution of $19,500) to 401K accounts. Those extra dollars can really add up between age 50 and retirement, especially when you factor in tax-free compounding.
- Favor stocks over fixed-income investments. For decades, the equity (stock) markets have been the overwhelming winner for generating wealth. Especially now, with interest rates at historically low levels, it is difficult to obtain the kind of growth in value that will allow women to prolong their retirement buying power without maintaining some portion of the portfolio in stocks. The key is to work with a qualified advisor who can help you diversify your equity investments to mitigate risk. And speaking of diversification…
- Diversify your assets to match your risk tolerance. Proper diversification is the number-one tool in your kit for long-term investing success. A portfolio that holds an appropriate mixture of stocks from different sectors and with different characteristics is less likely to suffer deep or prolonged losses and more likely to benefit on the upside from a wider variety of scenarios. This is another area where a qualified, professional advisor can offer huge benefits.
- Harness the power of the Roth account. If you already have a traditional IRA or 401K account, that’s great; you’re ahead of the game. But consider the benefits of the Roth versions: though you don’t get a tax deduction for depositing into them, the money in the account still grows tax-free and, best of all, it’s also tax-free when you start taking withdrawals in retirement. Tax-free compounding plus tax-free income in later years are two powerful reasons to take a careful look at a Roth IRA or 401K.
I specialize in helping women in transition make smart financial decisions and build personalized strategies for long-term financial success. If you’d like to find out more, please contact my office to schedule a no-obligation appointment. And to learn more, you can read my recent article, “Financially Fit over 50: Tips for Women,” by clicking here.
Stay Diversified, Stay YOUR Course!