Dos and Don’ts for Women Planning for Retirement

Planning for retirement is critical for everyone, especially women. Because of longer life expectancies and potential career interruptions, women often face unique financial challenges and considerations when it comes to retirement. Here are some dos and don’ts for retirement planning specifically tailored to women.

DOs

DO start early. Begin saving for retirement as early as possible. The power of compound interest can significantly boost your retirement savings over time. Starting small at a young age will ensure you have a successful retirement. For example, if you start saving $150 a month at age 22, by 65 you will have $500,000.

DO set clear goals. Determine your retirement goals, including when you want to retire and the lifestyle you envision. Knowing your objectives will help you plan more effectively. How can you get where you are going without a plan or directions?

DO contribute to retirement accounts. Maximize contributions to retirement accounts like 401(k)s, IRAs, or Roth IRAs. Take advantage of employer matching contributions if offered. Matching is free money from your employer on top of your pay. If you don’t contribute, you don’t get it.

DO diversify investments. Diversify your investment portfolio to spread risk and potentially increase returns. Consider a mix of stocks, bonds, and other assets based on your risk tolerance and time horizon. Read my blog to learn more about asset classes while comparing them to shoes.

DO seek professional advice. Consult with a financial advisor or planner who understands your unique financial situation and can help you create a customized retirement plan. Make sure you work with a CERTIFIED FINANCIAL PLANNER^® and a fiduciary. This person recommends what is in your, the client’s, best interest.

DO protect your health. Invest in health insurance and long-term care insurance to safeguard against unexpected medical expenses in retirement. Women spend more money than men on healthcare. The average woman spends $250,000 on healthcare in retirement.

DO create an emergency fund. Maintain an emergency fund to cover unexpected expenses and avoid tapping into retirement savings prematurely. CFP^®s recommend saving enough to cover expenses for three to six months, but many of my clients prefer one year.

DO stay informed. Stay informed about changes in retirement laws and regulations, as they can impact your retirement planning. Taxes and laws change frequently. If you are working with a fiduciary advisor, they will keep you up to date on all of this.

DON’Ts

DON’T rely solely on Social Security. While Social Security is an important source of retirement income, it’s not sufficient to maintain your desired lifestyle in retirement. Supplement it with personal savings and investments. Social Security was never intended to fund your retirement. The program was originally designed to cover 25-50%, and when it was established, people had much lower life expectancy. It is also important you don’t take it too early since we, as women, tend to have longer life expectancy.

DON’T neglect financial literacy. Take the time to understand financial concepts, investment options, and retirement planning strategies. Ignorance can lead to costly mistakes. I’ve seen women nervous and fearful to make the wrong decision. I have even seen some make no decisions at all. Knowledge is power. Work with an educator who has your best interest at heart, like a Fiduciary CFP^®.

DON’T overlook spousal benefits. If married, consider spousal benefits and survivor benefits within Social Security. These can provide financial support in case of your spouse’s disability or death. This starts at age 60, which is earlier than regular retirement.

DON’T drain retirement accounts prematurely. Avoid withdrawing from retirement accounts before retirement age, as it can result in penalties, taxes, and a reduction in your long-term savings. This can wreak havoc. I saw a client take from her account before the age of 59 1/2, requiring her to pay taxes and penalties, then invest in gold that devalued. She started with $1 million, paid $100,000 in penalties and $450,000 in taxes, and lost 30% of value at $135,000. After all was said and done, the account was worth $315,000. Ouch! Obviously, I advised against all of this, but I failed in changing her mind.

DON’T ignore estate planning. Create a comprehensive estate plan that includes wills, trusts, and powers of attorney to protect your assets and ensure your wishes are followed. I’ve seen scenarios where a client’s ex-husband gets the 401(k) because the beneficiaries were not updated after the divorce. Even if you update your will, the beneficiary documents supersede the will. Do your due diligence to make sure what you want to happen, happens!

DON’T underestimate longevity. Women tend to live longer than men on average. Plan for a longer retirement period and ensure your savings will last. I always say you could spend more time in retirement than in employment. If we live to 100 and retire at 60, that is a 40-year retirement.

DON’T ignore career advancement. Continue investing in your career to maximize your earning potential and retirement savings. Don’t be afraid to negotiate for fair compensation. We still have a pay wage gap in the US, despite efforts to fix it. It is getting better each year since the Equal Pay Day is moved up. Get a mentor at work and see if someone else can advocate for you!

DON’T procrastinate. Delaying retirement planning can significantly limit your options and require larger contributions later in life. Start as early as possible. Remember the magic of compounding interest.

Every individual’s retirement needs and circumstances are unique, so it’s essential to tailor your retirement plan to your specific goals and financial situation. Regularly review and adjust your plan as needed to stay on track and make necessary changes as you approach retirement.

At ACM Wealth, we partner with women to help them plan for a financially stable future and achieve their life goals. Our Women and Wealth team is comprised of wealth advisors who blend decades of wealth management expertise with personal life experiences to offer an empathetic approach to helping women thrive financially. We work with women and families to offer strategic financial planning guidance and wealth management support to help them live the lives they want on their own terms. If we can help you demystify money and use it to live your best life, please contact us.

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