Prepare Yourself for Retirement

Get your investments ready for the golden years

According to the U.S Census Bureau, women in the United States are expected to outlive men by nearly six years (80.8 years versus 75 years). As a result, women generally need more retirement funds than men. Additionally, the Department of Labor says that women are more likely to have part-time jobs that don’t offer retirement benefits, and that working women are more likely than men to interrupt their careers to take care of family members. Therefore, women may work fewer total years and contribute less toward their retirement than men.

With women generally living longer but saving less for retirement, it is clear that effective retirement planning is not a one-size-fits-all solution. But by taking a few important steps today, women can begin to position themselves for success in meeting their retirement goals.

Take Your Financial Temperature and Go In for Check Ups 
According to the January 2011 Merrill Lynch Affluent Insights Survey, only 34 percent of affluent non-retirees in Chicago are extremely confident in their ability to meet their retirement goals, and this percentage drops to 29 percent of affluent women non-retirees when broken down by gender. Additionally, according to the August 2011 iteration of the survey, affluent Chicagoans have become more anxious about a number of financial issues since the beginning of the year, including concerns about whether their retirement assets will last throughout their lifetime (64 percent in August 2011 versus 58 percent in January 2011).

Women can help overcome the financial challenges they face surrounding retirement planning by making a checklist to wrap their minds around their current financial situation and their long-term financial needs. Questions they should ask themselves, for example, include: 1) What is my vision for how I want to live my life in retirement? 2) What are the exact assets my spouse and I hold? and 3) Is my portfolio positioned for long-term growth?

No matter one’s age, it is advised that women make sure their assets are diversified across multiple investment and vehicle types – including both higher and lower risk opportunities. For women, overly-conservative investment habits only compound existing issues by slowing long-term growth. Women can use their annual retirement check-up with their financial advisor to look at the risk level of their investments, assess/adjust allocations as they and their advisor see fit, and address any new life milestones that may impact their retirement goals and planning strategy.

Benefit from Your Benefits
Often times, individuals allow their benefits and retirement-focused investment vehicles to go stale, failing to adjust their retirement savings accounts as their salary increases. Per the January 2011 Merrill Lynch Affluent Insights Survey, 64 percent of Chicago’s affluent employees with retirement benefit plans rely solely or heavily on these vehicles in retirement planning. Being aware of and adjusting benefit options is important.

It’s critical for women to know the entire suite of benefits available through their employer, and to take advantage of what their company offers – from retirement savings accounts to flexible spending accounts to commuter benefits. It’s also important to remember to keep an eye on regulatory changes to social security, Medicare and Medicaid, and how these changes might impact your retirement planning.

Be Realistic About Living in Retirement
When looking back, according to the January 2011 Merrill Lynch Affluent Insights Survey, 51 percent of retirees in Chicago now find that knowing how to manage retirement income through their lifetime is more important than they had expected, and 38 percent believe that having a clear vision for retirement is more important than they had originally thought. Many women do not realize how much money they’ll need to live the life they want in retirement, or don’t take the time to think about this figure in advance. It’s critical for women to take into consideration the kind of lifestyle they would like to have in retirement, and what the realistic costs associated with this lifestyle will be. In addition, the impact of inflation should not be overlooked when deciding how much will be needed in retirement.

While some women may believe planning for retirement sounds difficult, a financial advisor can help, no matter what life stage an investor is in, to properly structure a portfolio designed to meet retirement goals, including mapping out savings and investment ideas.

Start Now
Many women ask when they should begin thinking about retirement, and the answer is always “now.” If women maximize their retirement savings in their early years, they can better take full advantage of the potential for compound growth as they move into the retirement phase of their life. For women in long-term relationships, it is advised that they act as a teammate when it comes to financial decisions, rather than sitting on the sidelines and delegating the role to their spouse/partner.

While the statistics may be daunting, starting retirement planning early and having a strategy in place can help women who are involved in multiple work and life roles achieve the retirement lifestyle they envisioned for themselves and for their family. Keep in mind, investment products are not FDIC insured, not bank guaranteed and may lose value.

For additional strategies to help you prepare for the life you want to live in retirement, please visit http://www.ml.com/retire to view the Merrill Lynch Wealth Management webcast, Women and Retirement: Investing for the Life You Want, moderated by Charles Gibson.  

Tagged as: retirement, investment and money smarts