Cracking the Retirement Income Ceiling

I recently spoke at a Women’s Financial Forum about “Cracking the Retirement Income Ceiling.”  What is the retirement income ceiling?  Women are predicted to have less average annual income in retirement than men.  Why?  We live longer, we have shorter careers due to caretaking of children and parents, and the infamous career “glass ceiling” helped put our average wages below that of men.

Cracking-Pic.jpgI chose to share with my audience what we can control in the future instead of dwelling on how or why we have lagged.  The good news is that women of all ages have control over ways to enhance their income prospects for retirement.

Here are five things we can do to gain more control:

Begin by envisioning.  Create a retirement vision before you create your retirement plan. While this might be stating the obvious, it is worth stating.  Sitting down with your financial advisor to make sure you have enough retirement income is not where you begin- it is merely the means to finance your dreams and aspirations.  When, what and where need to be answered first.  Will you have an encore career?  Will it be full time or part time, or even volunteer?  Will you downsize your home? Will you live here or abroad?  Dare to envision and the financial plan can better follow.

It is never too early or too late to invest in YOU……by giving yourself a financial education.   With financial know-how and experience with your own successes and failures, you can be a more engaged and informed participant in the management of your financial affairs.   Commit to subscribing to at least one newsletter or magazine (ex. Kiplinger’s,Money Magazine), consider joining an investment club and even take classes at your community college.  Or Google “women and finance blogs” for a blog that speaks to you.

Start saving as early as possible and know it is never too late to start.  Your self-education will teach you that time is the greatest contributor to your savings growth.  In fact, time is a greater determinant of savings success than the amount you contribute or your rate of return.  If you employer does not offer a retirement savings plan (ex. 401(k), 403(b), SEP, SIMPLE) then take advantage of a traditional IRA, Roth IRA or a personal savings or investment account.  Save the most you can afford and make it effortless and routine through automatic paycheck deductions.

Consider insuring against the high expense of living longer.  Long term care insurance, combination life insurance policy/long term care rider and longevity insurance are a few ways to insure against the expense of declining health in our later years.  Begin to think about acquiring coverage in your 50’s when prices are lower.  The policy features and claims-paying records vary among firms so investigate carefully.  One resource is American Association for Long Term Care Insurance.

Be smart when claiming your Social Security benefit.  Women’s benefits average $300 less a month than men’s.  Social Security is complex and nuanced so claiming strategy software can help maximize your benefit choice.  It creates “what if” scenarios like: What if my husband deferred his benefit and I claimed 50%?  What if I claim on my ex-husband’s benefit? etc.   Before your financial advisor runs an analysis, register at  to ensure your salary record is accurate and get your (and husband’s if relevant) estimated benefit.  You can also do your own free analysis at T. Rowe Price.

There are other aspects of our financial picture we have control over that can affect our retirement income, like our family’s estate plan and our debt management. The media doom and gloom about Americans’ level of readiness for retirement may or may not be real.  Regardless, a woman can be better prepared by taking control now.