It seems like the biggest issue in trying to get a jump on doing something - anything, really - to start on a retirement plan is the sheer weight of the unknown.
How long are you going to live? Is Social Security going to be around that long, and how much money might it provide? How much should you be saving right now?
They're all the standard questions, but as has been noted by organizations that specialize in financial planning and education geared towards women, they're questions that are even more difficult to answer for female pre-retirees.
A webinar on Tuesday, co-sponsored by EBSA and WISER, the Women's Institute for a Secure Retirement, delved into some of those important and not-especially-easy-to-broach subjects, laying a solid educational foundation that can, hopefully, get female clients and plan participants thinking a bit more seriously about their retirement prospects.
The biggest issue, as panelists from EBSA, Social Security and WISER explained, is that female retirees face a double whammy: Their life expectancies are substantially longer than their male counterparts and spouses, but their retirement savings potential is much lower given their lower overall pay and their propensity to take part-time jobs, sans benefits, to meet obligations of childcare and other family responsibilities. Add the financial uncertainties of divorce or the economic issues related to outliving a spouse, and it's an extremely challenging puzzle.
Cindy Hounsell, WISER's president, was apt in noting it's all as overwhelming as trying to clean out a cluttered garage: Where do you start? What's most important? Can you actually accomplish anything at all?
But here's five straightforward pieces of advice for female workers, especially those who are about a decade or less from retirement age. And some of them aren't particularly pretty - as Hounsell said, maybe take your spouse out for a nice dinner before getting down to brass tacks on some of the following:
1. Confront the reality of retirement. It is indeed a tough subject, but EBSA has some surprisingly user-friendly planning tools that aren't necessarily geared for financial experts - instead, they're a useful part of the Department of Labor's Taking the Mystery Out of Retirement package, with interactive online worksheets women and their families can use to get a realistic picture of what they have, and what they'll need. Most women have never spent any time figuring out what their monthly budgets might be when the paychecks stop arriving; these forms are a good and totally neutral tool to use to factor in the value of your retirement savings plans, the value of your home and the bump you might receive from Social Security.
2. Have a frank discussion on the realities of divorce and retirement. It's a sad but overly common outcome to many marriages, and an even more frequent issue in those latter, pre-retirement years. But the fact of the matter is that any pensions or retirement savings are joint assets and can be fairly split up - at the time of divorce, should that sad occasion occur. Wait until after and, as the experts contest, you may be out of luck as courts rarely ever approve post-divorce settlements related to retirement funds. Should a divorcing spouse be happy to take the house and sign off on receiving future retirement benefits? The general advice seems to be no, considering the length of time they might need those benefits in the future. On the upside, Social Security benefits can indeed be arranged after divorce, with relatively little drama.
3. Ask questions about survivor benefits. Another tough subject, but a good discussion point whenever paperwork appears related to retirement accounts. As Hounsell noted, they have to be chosen and are not automatic: The death of a spouse won't magically mean that pension checks or IRA withdrawals will just be reassigned to the surviving partner. Make sure to talk about it, and get it in writing.
4. Do the heavy lifting when it comes to maximizing workplace benefits. The recent round of fee disclosures may be a good ice-breaker of reminding employees that they actually do have 401(k) benefits available to them; working women need to take some initiative and figure out what's out there, how much matching money is provided and then do the best to contribute as much as possible, as early as possible. Are there other workplace benefits? An SEP or SIMPLE IRA incentive? Every little bit helps, and if it requires setting up their own IRA through a bank or a credit union, even that $5,000 saved a year (plus the extra $1,000 if they're 50-plus) will go a long way to having a softer landing when retirement arrives.
5. Figure out Social Security, but don't rely on it. Irene Saccoccio, Social Security's national public affairs specialist, pointed out that 60 percent of Social Security benefit checks go to women, but with those benefits only amounting to 40 percent of pre-retirement earnings, they're not a complete fall-back plan. Most importantly, female workers should do the math and try to find ways to delay making their Social Security claim as long as possible, as that could virtually double their monthly benefits. Drawing at age 62 will provide 75 percent of the maximum (a maximum that tops out at $2,513 a month for the most qualified recipient), but hanging on until 70 could generate checks of 132 percent of the allotment. There are also a litany of disability and survivors' benefits available, but they won't do the full job. Social Security's online retirement planner and retirement estimator are both good tools to help set the right date to apply.
If women take a hard look at those issues - and yes, they're not exactly fun to talk about, but it's important - they can also start to make strategic decisions that will further guarantee a more economically viable (and, in all reality, lengthy) retirement: Should they work longer? Should they put more money into their employer's plan? Are there ways they can cut their pre- and post-retirement expenses? And what can they do to make sure they don't dip into their retirement savings, despite ongoing economic troubles?
Big questions, indeed. But getting an early start and doing something is definitely better than the alternative.