Important to plan early for retirement — especially for women
Ryan Summerlin April 25, 2013
Women have an even greater financial planning need than men do. There are several reasons for that, including earnings and life expectancy. Women control a large percent of the wealth in this country.
There are almost nine million female-owned businesses in the United States, and that’s an increase of about 60 percent since 1997. About half of households with a net worth greater than half a million dollars are headed by women. Women earn more than $1 trillion per year.
Women also live longer than men do. On average women live seven years longer than men and the average age of widowhood is 56. About one-fourth of widows go through their husbands death benefits in just two months, and one in two marriages ends in divorce. Women also take quite a bit of time from work to raise children. The average time out of the labor force for child rearing is 11 ½ years.
According to some data from a recent Harris Interactive poll, women tend to not be well prepared for retirement. About one-third of women between the ages of 40 and 69 don’t know how much money they can safely withdraw from their retirement funds. Almost one-third of women in their 40s and 50s estimate they can withdraw between 11 percent and 30 percent of their retirement funds each year. That is a very high withdrawal rate and will likely lead to depleting your hard-earned savings.
If your goal is to preserve your principal you should start withdrawing at a rate about 4 percent per year and increase that by the rate of inflation each year. So if you have a $100,000 account, you should only take $4,000 the first year and plan to increase that by 2 to 3 percent each year. So the second year you might take $4,120 and so on. If your goal is to spend your fund down over your life expectancy, then run a calculation based on your life expectancy.
Both men and women don’t save enough for retirement. However, women save even less. Men have an average retirement savings account of $25,000 while women have only $20,000. Women also have a tendency to set lower goals for their retirement fund. Despite greater life expectancy, when asked how much they were planning for in retirement savings women had a lower target of $200,000 versus $400,000 for men.
It’s very important to plan early and set realistic goals.
Kenneth Roberts is a Truckee based Registered Investment Advisor. Information on his money management service can be found at his blog at www.sellacalloption.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.