RETIREMENT PLANNING THROUGH THE DECADES
What does your retirement look like? Have you thought about it lately? Do you know if you’re retirement ready?
Will you be living in the same home? Or even the same state? Do you see yourself caring for grandchildren? Working part time? Volunteering or traveling the world?
The answers, retirement planning experts say, are different for every woman.
Tracey Anton, president of T. Anton Investment House, Inc., says that a woman’s vision of her retirement is as the “captain of the ship.”
“It can be whatever you want it to be, but you have to identify those factors early on because we all make choices along the way,” Anton explains. “Sometimes we don’t even realize we’re making certain choices and sacrificing other things.”
Debbie Oswald, principal at SVA Plumb Wealth Management LLC, calls this approach a woman’s “retirementality.” She says the traditional way of thinking is that people just stop working once retired and while that is still true in many cases, today’s retirees have many different goals for their golden years.
The amount of money each individual needs also differs as much as their unique lifestyle preferences. “I cringe when I see statistics that say we need to live on ‘x’ percentage of our money in retirement,” says Jody Brown, a financial advisor with summit financial Ad- visors at Summit Credit Union. “Every situation is so drastically different. I usually start a meeting with new clients by asking them to define what retirement means for them. We’re all just individuals that have to find our own path.”
GET YOUR HEAD IN THE GAME
Regardless of the kind of retirement you desire, a Prudential Research study from 2014- 15, “Financial Experience and Behaviors Among Women,” reported that fewer than 2 in 10 women feel “very prepared to make wise financial decisions and just a third feel they are on track or ahead of schedule with planning and saving for retirement.
It’s well-known that women live longer and they are often the caregivers for children and parents. Their role as caregivers can mean part-time work and leaves of absence that often negatively impact their lifetime earnings, benefits and career opportunities. In many ways this loss of income can make retirement planning seem daunting.
So planning for that time is all the more important for women, experts say.
Retirement also involves more than simply saving money. While investments are a significant portion of a retirement portfolio, estate planning and long-term care insurance are other components of the retirement equation. “By doing an estate plan, you’re laying out your wishes as far as what you want to happen to your assets when you pass,” explains Melissa Warner, an attorney at Axley Brynelson.
Lisa Martinson, a partner at Croak, Gonzalez, Eckerle and Martinson Attorneys at Law, who speaks on behalf of Long Term Care Insurance Solutions, says financial security in retirement includes planning for the unexpected in terms of health and wellness, a different kind of investment option.
Martinson explains that nursing care can cost anywhere from $5,000 to $8,000 per month, in today’s dollars. “It’s very important to a lot of people that they’ve worked hard to pass a legacy along to their children, and if they get hit with a long-term care situation, that might be all gone,” she explains. “Long-term care insurance can help.”
Many providers offer long-term care insurance riders on life insurance policies, Martinson says. Such riders offer an accelerated payout on the life insurance policy to cover qualified long-term care costs. “Such policies make it possible for families to receive life insurance benefits and the protection if the insured needs long-term care,” she says.
Jon Goldstein, a private wealth advisor and CEO at Goldstein and Associates, references this famous quote: “People don’t plan to fail, they just fail to plan.” He says it sounds cliché, but there is a lot of truth in that statement. “Retirement means financial independence,” Goldstein says. “It’s that freedom to choose on a daily basis what it is you want to do.”
He advises women to start planning early, and ask for advice. “Younger people in their 20s and 30s tend to spend more money on their phone and Internet plans than they do on retirement savings,” Goldstein adds. “When you look at the impact of what that would be if they had just saved that money, it’s a staggering number.”
BY THE DECADE:GET SERIOUS IN YOUR 50s
This is the crucial decade, but Tracey Anton, of T. Anton Investment House, Inc., says that no matter where you are with retirement planning in your 50s, “Don’t give up. Don’t have ‘the glass is half-empty’ syndrome.” She also advises against being conservative at this age, and explains that she’s seen women who started saving late and wanted to be careful with every dollar. Anton says the opposite is true: It’s important to be more aggressive, investing in growth stocks, value stocks and international stocks. “And when the market is volatile, you keep on buying,” she adds.
Summit Financial Advisors’ Brown says that a woman in her 50s should be determined about saving for retirement, and uses the analogy of caring for your health. “Is it okay to neglect your health, eat poorly and not exercise until you are 50?” she asks. “It’s not, because you only will have greater problems. The same goes for your financial health. The 50s is a time to be a little more serious about your retirement, because the time frame for which your dollars have to grow has lessened.”
Jon Goldstein, of Goldstein and Associates, also links health and retirement in this age group. “The impact between the two and where your money goes is not small,” he says, agreeing that health care is a huge consideration in the senior years
He says the 50s are the years to leverage the retirement options available, and also consider when your significant other is retiring, Goldstein says. Other considerations are adult children and helping pay for cars, weddings and first homes. “It’s hard to say no, but who are you planning for?” Goldstein asks. “They call this the sandwich generation, and there are familial obligations on both sides. Eventually, you’ll be planning for everyone else and giving up what you want and need.”
Debbie Oswald of SVA Plumb Wealth Management concurs, and says the balancing act is no myth during this time of life. “Truly putting your needs first is the most important thing,” she says. “The best gift you can give your family is your own financial well being and independence.”
Now is the time to focus on retirement savings and maximizing contributions to existing plans. There is an age 50 catch-up opportunity to save more, but in addition to a company plan, women should consider a personal IRA account. Those 50 and older can contribute up to $6,500 a year in 2015. Oswald says a diverse portfolio of taxed, tax-free and tax-deferred assets helps with tax planning and offers great flexibility in retirement.
THE 50s, CONTINUED: EXTRA OPTIONS
Long-term care insurance is one retirement vehicle that can be purchased at any age, but women in their 50s tend to discuss the option more. In fact, 56.5 percent of people apply in their mid-50s to early 60s, according to the American Association for Long-Term Care Insurance’s 2014 LTCi Sourcebook.
Lisa Martinson, with the Croak, Gonzalez, Eckerle and Martinson law firm, says that in this decade, women have a better idea of financial stability, disposable income and their overall health. “There are just more and more things people feel like they are trying to put away money for and make work,” she says. “Think about paying yourself first, and this would include long-term care, because then at least you have security if something happens.”
This also helps spouses and families, who may be left with medical bills if a serious health condition arises. Martinson explains that, like house insurance, the policy may never be needed. “It’s heartbreaking to families when they are trying to choose and take care of mom or dad, and there’s just not enough income for an $8,000 bill,” she says. With a variety of policies available, Martinson says long-term care now pays for nursing facilities as well as assisted living and in-home care. In 2012, 56 percent of new claims were for home care, according to the Sourcebook.
Care decisions also come into play when discussing estate planning. A woman in her 50s should really review her beneficiaries and determine whether a trust is still necessary for grown children. Women also need to determine who to give powers of attorney for financial and health care if she is incapacitated. While it may have seemed logical to choose a spouse or other family member decades earlier, it may be the time to consider asking grown children or younger relatives to step into that role.
Warner says by the time a person nears retirement they most likely will have a revocable living trust in place rather than a simple will, and should begin thinking about what charities or bequests/trusts for family members they want to include in their estate plan.
BY THE DECADE: GET FOCUSED IN YOUR 40s
Brown says that a woman in her 40s has multiple demands for her dollars and time. “What’s important is that you don’t put everyone else’s needs ahead of your own,” she says, and admits this is often contradictory to the role parents assume.
She says while caring for children and aging parents demands women become very selfless, they should still be selfish about setting aside time to plan for retirement.
While the 50s is the most popular time to look at long-term care insurance, Martinson says there are incentives to buy early. First, the premiums are more affordable and second, it’s more likely to be approved for the coverage. “In your 50s, you may already be dealing with diabetes or someone has had cancer,” she explains. “If they find something that could be a problem, they may deny you or it might knock you out of the running later.” She says some employers offer this insurance as a part of their benefit package, something women should look into first.
You must also put your needs first when it comes to saving money for retirement. “There’s a reason the airlines tell you to put your own mask on first,” Brown adds. “Don’t pull back on your 401(k) because of day care costs. This is when you have to look at other avenues.”
Oswald says this line of thinking is exactly right, and encourages women in their 40s to assess their progress in retirement planning. She also encourages women to increase their contributions and consider an account outside of the traditional 401(k), such as a Roth IRA, again to have that diverse tax portfolio of accounts, and more flexibility when the time comes to withdraw from them.
She advises women in this age group, many of whom are still making job changes, to know each company’s vesting guidelines (you are vested when you are entitled to the full company contribution in your retirement savings account) as well as 401(k) matching and maximization options. “Instead of leaving on Dec. 20 if you have to be employed on Dec. 31 to receive the contribution, you may want to wait until Jan. 5,” she says. “People often don’t pay attention to these details and money gets left behind.”
Anton wants women at this age to know what their “number” is. “What number do you need to reach to roughly get to retirement, whatever your goals may be? And write it down, as you’re much more likely to achieve them.”
She says most women are probably better off than what they think, but there are also some scary statistics, such as that most people haven’t saved $50,000 by age 40. “Whether you have done the work or haven’t, do it now,” Anton says. “It avoids the pitfall of giving everything to your kids today and not looking at how you’re going to be sitting financially, later.”
Goldstein agrees that the 40s are a transitional time for families and careers. He says this decade is one that can be a major point of catching up if someone hasn’t done any retirement planning, or a time of simply reviewing previous goals.
“It’s also a point where there’s typically a little more flexibility in the day-to-day pay checks and you have more choices,” he says.
BY THE DECADE: GET STARTED IN YOUR 30s
If you’re in your 30s, it’s time to lay a solid foundation for your life three decades from now. And it’s never too early.
Part of this starts with an estate plan. While those may seem intimidating words to a 30-year-old, with or without children, women must make decisions for themselves and their families should the unexpected happen. “It’s important to have an estate plan,” says Warner. “Have powers of attorney declared and have someone legally authorized to handle financial/ health care decisions. Thirty-year-olds do get sick or have accidents.”
She explains that if no one is named, a person’s family has to go to court and petition to be appointed guardian, enabling them to pay bills or make health care choices for their loved one. With small children, estate planning in your 30s means nominating someone to care for them if need be.
Oswald says “every small step makes a big impact.” She acknowledges this decade involves many demands on women’s personal and professional resources. But, she encourages five healthy financial habits:
1) Create a budget.
2) Build an emergency fund.
3) Pay down high-interest loans.
4) Maintain what you can afford each month.
5)Take action on your retirement savings.
6) Find ways of saving a little bit more money each month to put to the side for your retirement fund. Use websites like Simple Switch to get a better deal for your energy bills.