By Joe Gross, CDFA®
How can women start planning for their retirement journey, especially when their life situation doesn’t look like the norm? Between longer life expectancy, (1) lower marriage rates, (2) and consistently high divorce rates, (3) it’s estimated that 80% of women will end up alone. (4) That means it’s never been more important for women to start taking control of their financial life.
Given all that, how can you make sure your financial future is secure? Saving for the future would be the obvious answer, but in your situation, money isn’t the problem. Planning for retirement is about much more than just achieving a specific number in your bank account; it includes shoring up a spending plan, creating a withdrawal strategy, and planning for healthcare, long-term care, and gifting.
You can find general retirement advice anywhere, but much of what you hear or read applies to married couples. Your situation is unique and will require personalized solutions and big-picture financial coordination and management to ensure that your future stays secure.
Create a Retirement Budget
Even with your ample resources, you need a budget both now and in retirement. Since you don’t have two incomes, two retirement plans, and two Social Security benefits as married women do, you need to make sure your expenses are in check so that your ideal lifestyle is secure for the long term.
Map out, in detail, your essential and non-essential expenses and income sources, then create a monthly and yearly cash-flow plan and automate your savings. Having a budget doesn’t mean saying no to everything you want, but it does help keep your spending under control, maximize the money available to you in retirement, and minimize debt.
Less debt in retirement means more flexibility with your money. Regardless of the type of debt you carry, the more interest you pay and the higher your monthly payments, the less you’ll have to do what you want.
Credit cards, car loans, and even secured debt like mortgages have an interest rate that is working against your net worth. If you have a credit card that is hitting you for 22.99% APR, then your retirement account that is worth the same amount giving you an 8% return is still way behind. Make clearing out your debts a priority, and you will find wealth-building a much easier task!
Set Up a Withdrawal Plan
Just because you’ve worked hard to save for retirement and build up a nest egg doesn’t mean you can rest easy. Once you start tapping into your savings, you need to develop a strategy to withdraw your funds so they last the rest of your life, however long that may be.
Your retirement accounts are all taxed differently. If you don’t have a strategic withdrawal plan in place, you could end up with a large tax bill at the end of the year. For example, a $50,000 withdrawal from a Roth IRA will have a wildly different tax impact than that same distribution from a traditional IRA. If you blindly take your money and run, you could trigger an avalanche of higher Social Security taxes, investment surtax, capital gains taxes, and even higher Medicare premiums, which will eat away at the funds that were supposed to carry you through retirement. Creating a tax plan can help you strategically withdraw from your various retirement accounts and minimize your tax liability.
Since there is no simple, one-size-fits-all plan, you need to figure out what will work for you and your unique situation, taking various factors into account: time horizon, risk tolerance, asset allocation, and unexpected living expenses.
Build a Relationship With Your Financial Advisor
Finances can be overwhelming, especially if you’ve experienced a major life transition such as divorce or the death of a spouse. In these situations, it’s common for women to have no idea what’s going on with their finances and no one to turn to. Even in the 21st century, with all the strides women have made in society, more than half of women let their husbands handle all the investment decisions and a large percentage of women regret not taking a more active role in managing their finances when they were married. (5)
Having a trusted financial advisor at your side to walk you through both the major and the minor decisions can make all the difference in your financial future. And be sure to rely on your financial team—70% of wealthy women who have an advisor only turn to them when they have specialized or complicated issues. (6) Your advisor can help you build a strong foundation and also keep you on track as life goes on.
Start Today for a Stronger Future
Traditionally, the world of finance has been a space dominated by men, but that has changed these days. There are plenty of women out there taking action and achieving financial freedom and security on their own. I have dedicated my career to helping women learn successful retirement strategies and navigate their unique life situations. The financial decisions you make today can have a lasting impact for decades to come.
If you’d like to partner with a financial planner who understands your unique needs and inspires you to be more confident in your financial decisions, contact Joe today at 503-446-6450 or firstname.lastname@example.org.
Joe Gross is first vice president and senior financial advisor at JGP Wealth Management, an independent, fee-based financial advisory firm in Portland, Oregon. With over 25 years of experience under his belt, Joe is passionate about putting his clients first and helping them stay focused on their financial goals, inspiring confidence in their future. As a Certified Divorce Financial Analyst (CDFA®), he specializes in addressing the unique financial issues of divorce. Joe is known for his tenacity to keep clients on track toward their dreams and for his attention to detail, which is second to none! His clients know that nothing will slip through the cracks when working with Joe!Joe graduated from the University of Arizona with a bachelor’s degree in finance. Outside of work, he enjoys being involved in the community and is actively involved with organizations close to his heart. Joe is a former president and current board member of the ALS Association of Oregon and Southwest Washington and a long-time member of The Multnomah Athletic Club. In his free time, he enjoys fly fishing, spending time with his family, and cheering on his alma mater, the University of Arizona. To learn more about Joe, connect with him on LinkedIn. You can also watch his latest webinar on How To Pick Up The Financial Pieces After Divorce.