On the hunt for a Mother's Day gift this weekend? Here's one that won't cost a dime but could provide a big boost to Mom's pocketbook down the road: Sit down and have a talk about retirement planning.
Women who aren't mothers need to have the talk, too. That's because women face a much tougher retirement outlook than men, and the reasons are clear.
"Women have lower lifetime income based on less time in the workforce," says David Littell, who directs a program focused on retirement income at the American College in Bryn Mawr, Pennsylvania. "As a result, they have less in savings, lower Social Security benefits - and they live longer than men. Those things don't go well together."
Many women still earn lower wages than men: On average, women made about 81 percent of the median earnings of men in 2012, according to the U.S. Bureau of Labor Statistics.
They're also more likely than men to work part-time, often because of caregiving responsibilities for aging parents or children. That cuts into earnings, but it also means they are less likely to have access to workplace retirement plans.
The 2014 Transamerica Retirement Survey found that 66 percent of women have access to a workplace retirement plan, compared with 71 percent of men. Women who do have access to a plan participate at nearly the same rates as men, but their contribution levels are lower - 7 percent of salary, compared with 10 percent for men.
TAKING CONTROL
Experts point to several valuable steps that women - moms or not - can take to boost their retirement security, including:
- Maximize Social Security. The most important step women can take to improve their retirement prospects is to get the most out of Social Security. For most, that will mean waiting to claim benefits until full retirement age (currently 66) or longer. Each year of delayed filing (up to age 70) translates to roughly 8 percent additional annual income.
"If you can wait, that gives you more secure income for life that you don't have to worry about outliving, and it's adjusted annually for inflation," says Joan Entmacher, vice president for family economic security at the National Women's Law Center, a non-profit advocacy organization. Entmacher also notes that Social Security often is worth more to women at advanced ages, when other resources have been exhausted.
She advises women to "get out of the mentality of thinking about the total amount you'll get in your life, since you can't be sure how long you'll live." It's also critical, she notes, for couples to plan Social Security benefits together. The higher-earning spouse - typically the man - should delay benefits as long as possible, which will result in a much higher survivor benefit for spouses down the road.
- Get an early start. Starting early on retirement saving is critical, because even small amounts saved now benefit from compounding over time. Research by Vanguard has shown that an investor who starts at age 25 with a moderate investment allocation and contributes 6 percent of salary will finish with 34 percent more in her account than the same investor who starts at 35 - and 64 percent more than an investor who starts at 45.
"Since many women face interruptions in work sometime during their career, starting to save on your first job can be incredibly meaningful," notes Littell.
- Make a plan. When you don't have a written retirement plan, it's difficult to make adjustments along the way. If possible, make a plan with the help of a financial adviser, says Littell. "This is the best way to keep track of where you are, and to be able to adjust when conditions change."
An adviser can be especially helpful sorting out family financial pressures that can affect retirement, he adds. Merrill Lynch research shows that 60 percent of Americans over age age 50 are providing financial support to family members, and 5.8 million children live in grandparents' homes. "Helping with family needs is important, but if you don't have a plan, you don't really know how much you can afford to help," says Littell.
"I don't have data to prove this, but women are very focused on family relationships, so they're more at risk of hurting their own retirement security by giving away more than they should."
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