For women over 50, preparing for retirement and ensuring your future financial health is something that cannot be emphasized enough. Women work so much of their lives, in the home and at their jobs, making ends meet and raising families. As we age, financial security plays a really important role as we look to maintain our quality of life in retirement.
Women now account for over half of the workforce, and tend to stay in the workforce longer. The full retirement age for Social Security is 67 years old, so many women may continue working past the age of 65.
While previous generations could look forward to a debt-free retirement, with a pension plan and health insurance, the situation is becoming more challenging today. For women over 50 with limited incomes, the future is less predictable and secure, as we all face a rising cost of living, more debt and a greater reliance on Social Security.
Whether you are nearing retirement or are 10 or 15 years away, putting money away for a nest egg is one of the best things you can do. That means looking at your financial behavior now and developing good strategies to fulfill your retirement goals. Do you have a plan for saving, investing, and eliminating debts now, so that you can live the life you desire in the future?
Preparing For Retirement
It may surprise you to learn that only half of Americans have calculated how much they need to save for retirement, according to the U.S. Department of Labor. In 2020, more than 25 percent of workers in private industry with access to a contribution plan, such as a 401(k), did not participate.
Preparing for financial security will not just happen. It requires planning and commitment. If you have started saving, be disciplined and keep on going. If you haven’t started saving, it’s time to begin. The sooner you start tucking away those dollars, the more time your money will have to grow.
You can start with a small amount each month and gradually increase it, if possible. Make saving for retirement a priority by setting a goal and creating a plan to reach it. Retirement is costly and experts say that you would need 70 to 90 percent of your pre-retirement income to maintain your standard of living. Use a retirement calculator to get an accurate idea of how much you will need.
If your employer offers a retirement savings plan, contribute to it. Retirement plans offer tax advantages to encourage you to save, as well as contribution limits and withdrawal rules. Types of contribution plans include 401(k) plans, employee stock ownership plans, and profit-sharing plans. Financial advisors recommend that you contribute 10 percent to 15 percent of your income toward your plan annually.
If your employer participates in contribution matching, that’s extra free money that you can save! You will benefit from tax deferrals and compound interest which makes a big difference over time. The contribution limit for 2023 is $22,500, but if you’re aged 50 and over, you are eligible for an additional $7,500 in Catch-Up Contributions. This brings your total contribution limit to $30,000.
What is Dollar Cost Averaging?
Contributing to a 401(k) or IRA (individual retirement account) plan is easy and convenient, as automatic deductions can be made for a specified amount, up to a limit. This method takes advantage of dollar cost averaging, a strategy that involves investing a fixed amount of money at regular intervals, regardless of price.
This strategy can be utilized when buying mutual funds, stocks, or exchange-traded funds (ETFs) in your portfolio. It’s a simple and efficient way to ensure that you invest regularly, and potentially lower your average cost per share by reducing the impact of market volatility.
Working with a Financial Advisor
When planning for retirement, it can be helpful to work with a financial advisor. A retirement financial advisor is a professional who can assist you in formulating a plan to ensure that you are on track to meet your retirement goals. This includes all aspects of retirement planning, from budgeting and spending, to saving and investing. A financial advisor can also help you with tax planning pertaining to income taxes on your pension or other retirement income.
The pros of working with a retirement advisor are personalized advice based on your unique circumstances, and peace of mind knowing you have a plan for financial security in place when you are no longer working. The cons are that advisors charge fees for their services, which could be an hourly or flat fee, or percentage of assets under management. Inquire about the costs upfront so that there are no surprises later.
You also give up control of your finances and have to rely on someone else, which you may find difficult. It’s important to stay involved with your financial planning even with an advisor, so do your research and find someone that you feel comfortable working with.
What If You Haven’t Saved Enough Money For Retirement?
Some women over 50 may find that their life situation has made it hard to save money or even contemplate retirement. You may be alone, divorced or widowed, or struggling with debt and finding it difficult to meet your most basic needs. If you haven’t been able to save much, or at least enough to last you through your retirement years, you are not alone. The fear of outliving your savings and investments is a valid one, but there are steps you can take to get back on track.
Steps To Get Back On Track
Create a budget and look for ways to streamline your spending to make room for retirement savings. If you’re unable to contribute a portion of every paycheck to your retirement account, make one-off deposits whenever you can afford to. It will still make a difference over time.
Stay relevant in the job market. If you plan to work as long as possible, keeping your job skills up to date is key. Stay aware of the demands of the employment market and network with people in your field. That may help you to find part-time or supplemental sources of income.
Use tax incentives to catch up on your savings, such as the Saver’s Credit. With the Retirement Savings Contributions Credit (Saver’s Credit), you may be able to take a tax credit for making eligible contributions to your retirement account. You must be age 18 or older, not claimed as a dependent on another person’s return, and not a full-time student.
Bottom line, it is never too late to start organizing your finances in preparation for retirement. Take a good, hard look at your situation, initiate steps to save and invest to secure your financial future. Take charge of your financial health now, so that you can live the life you want and improve your long-term financial security.
