Life Doesn't Always Go According to Plan:
Things To Consider When You Are Suddenly Single
- What happens to your immediate income?
- Your retirement plans, how do you maintain the hope of retirement?
- The distribution of assets, what is the best way to divide assets, financially speaking?
- My ex took care of all the money and I need an objective financial professional to review the plans we are making.
- Social Security: how do you seek to maximize your income?
- How do you coordinate all of your assets to replace lost income?
- Your estate: how do you make sure the people you love get your assets?
- This stuff is all new to me, "my late spouse took care of it, I'm lost!"
Women And Money:
Let's be clear: sometimes when men talk about women they make sweeping generalizations or run the risk of sounding patronizing. As a Father of daughters and the husband of a strong woman, let me be clear, I want no part of that! In my experience, like men, there are plenty of women who are great investors and good with money. I know, I've met them. I've had some brilliant female clients and some male clients who were, well, let's just say, not so good with money. So: our purpose in talking about women and investing is to talk about some of the statistics that we've encountered and to let you know that we are aware of some of the special problems that women encounter:
For Women, a Pay Gap Could Lead to a Retirement Gap
Women in the workforce generally earn less than men. While the gender pay gap is narrowing, it is still significant. The difference in wages, coupled with other factors, can lead to a shortfall in retirement savings for women. Statistically speaking:
Generally, women work fewer years and contribute less toward their retirement than men, resulting in lower lifetime savings. According to the U.S. Department of Labor:
56.7% of women work at gainful employment, which accounts for 46.8% of the labor force
The median annual earnings for women is $39,621 — 21.4% less than the median annual earnings for men
Women are more likely to work in part-time jobs that don't qualify for a retirement plan
Of the 63 million working women between the ages of 21 and 64, just 44% participate in a retirement plan
Working women are more likely than men to interrupt their careers to take care of family members
On average, a woman retiring at age 65 can expect to live another 20 years, two years longer than a man of the same age
All else being equal, these factors mean women are more likely than men to face a retirement income shortfall. If you do find yourself facing a potential shortfall, here are some options to consider.
Estimate how much income you'll need. Find out how much you can expect to receive from Social Security, pension plans, and other available sources. Then set a retirement savings goal and keep track of your progress.
Save, save, save
Save as much as you can. Take full advantage of IRAs and employer-sponsored retirement plans such as 401(k)s. Any investment earnings in these plans accumulate tax deferred — or tax-free, in the case of Roth accounts. Once you reach age 50, utilize special "catch-up" rules that let you make contributions over and above the normal limits (you can contribute an extra $1,000 to IRAs, and an extra $6,000 to 401(k) plans in 2017). If your employer matches your contributions, try to contribute at least as much as necessary to get the full company match — it's free money. Distributions from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income. Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty.
One way of dealing with a projected income shortfall is to stay in the workforce longer than you had planned. By doing so, you can continue supporting yourself with a salary rather than dipping into your retirement savings. And if you delay taking Social Security benefits, your monthly payment will increase.
Think about if it is suitable for you to invest more aggressively
It's not uncommon for women to invest more conservatively than men. You may want to revisit your investment choices, particularly if you're still at least 10 to 15 years from retirement. Consider whether it makes sense to be slightly more aggressive. If you're willing to accept more risk, you may be able to increase your potential return. However, there are no guarantees; as you take on more risk, your potential for loss (including the risk of loss of principal) grows as well.
Consider these common factors that can affect retirement income
When planning for your retirement, consider investment risk, inflation, taxes, and health-related expenses — factors that can affect your income and savings. While many of these same issues can affect your income during your working years, you may not notice their influence because you're not depending on your savings as a major source of income. However, these common factors can greatly affect your retirement income, so it's important to plan for them.
Latitudes Financial Strategies Can Help:
Our professional training and our personal experience has helped us to become experienced at helping people who find themselves Suddenly Single. Give us a call to discuss some of these issues and to help chart a course to come to some confidence with these issues at this stressful time of your life.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.