If you are a baby boomer woman, you have probably spent most of your adult life rushing around and trying to do everything. You try to be a wife and a mother. You try to build a career, take care of your family, and pay the bills on time. Some days it feels like we do not have a life because we have to take care of so many things.
For many women in their 50s and 60s, it was normal to stop working when you started a family and had kids. Many women stayed home for years or worked part-time to help make ends meet. Because they put their family first their career opportunities were limited and resulted in lower wages, limited savings, and smaller Social Security benefits.
I have read many articles discussing why baby boomer’s generation is way behind on saving for retirement and how to help them. Baby boomer women often described as farther behind on retirement planning goals than men.
As women, we tend to let investing, financial and retirement planning responsibility fall on the men in our lives. Traditionally it has been the husband who took care of investments and financial planning, while the wife took care of the family.
“Among women aged 65 and up, the poverty rate remains nearly double that of men in the same age group. And, even though they will statistically live longer than men, many women are less likely to have planned or saved enough for retirement.” From Kiplinger, by Linda Gardner
Here are several reasons why baby boomer women need to have their own money in retirement:
Women live longer than men.
On average, we live 5 years longer than men. If we do not have enough savings to cover these years many of us will be at high risk of living in poverty in old age. Another sad truth about old age is that these years are not usually cheap or healthy. This means if we live longer than our men, we need to have more retirement resources than they have.
The truth is many women will likely take the sole responsibility of their finances at some point in their lives. Some women will remain single, but others will be divorced or widowed. If statistics show that we will outlive our husbands, it means that many of us could lose some of our husband’s pension or their Social Security benefits.
Another truth is if we will live longer there is a high chance that the financial burden of caring for our elderly parents or in-laws will fall on our shoulders.
Women earn less money than men.
Women still typically earn 25 percent less than men. The good news for women that we live in a new age where the barriers holding us back for so long seem to be declining. And yet there are still many obstacles to overcome.
Many baby boomer women did not have a steady career. Most of their lives they worked part-time or for small firms and non-profits. In many cases, it means they did not have access to an employer-sponsored retirement plan like 401(k) and they did not save enough money for retirement.
Women take time off to raise a family.
Many baby boomer women took time off to raise kids. Some of us still need to take time off to care for aging parents or a family member. It made harder for us to save as much as men. Unfortunately, a common mistake among boomer women is not to give retirement savings a high enough importance. We care for our families before we take care of ourselves.
If you are in your 50’s or 60’s and have not taken retirement planning seriously there is still time to change it.
Many women in their 50’s and 60’s feel that managing finances are not for them or men could be more qualified to handle their finances. After all, we carry so many responsibilities on our shoulders that there is no time to manage finances.
I am with you. I am making the same excuses and wish life would be easier. However, we cannot just sit here and wait for a happy retirement without taking certain steps.
How to save and invest for retirement for baby boomer women:
Get a clear picture of your financial situation.
Start by creating a personal balance sheet. The first step is to get organized and get your financial numbers on a sheet. If your husband already has these numbers, ask him to share details with you. And if he does not have all financial information on one sheet you should prepare it together.
You do not need to go fancy and use a digital spreadsheet if you do not feel comfortable. Use old-school paper and pencil and start with ballpark numbers.
First, you want to see what you have – what do you own and what do you owe.
What are your assets?
- The current value of your home
- The current value of your cars (a boat?)
- Value of your vacation home or rental property (if you have one)
- How much money do you have in retirement accounts including 401(k), IRA, Roth IRA?
- How much money do you have in a bank savings account?
What are your liabilities or debt?
- Your mortgage balances
- Car loan
- Student Loan
- Credit card debt
- Other loans
Create a budget and incorporate your savings goals.
Second, if you do not have a budget, you need to create one now. Budgeting will create a framework for your finances. Thus, it will help you understand where your money is going each month. If you do not know how you spend your money there is not any leftover to save.
The main goal of creating a budget is to incorporate your savings goals.
After creating your personal balance sheet, you will get an idea of how much you have saved for retirement. If it is not enough there is still time to save more.
In our family my husband Roman takes care of budgeting, paying bills, and day-to-day money management. And I take care of retirement accounts and investment account portfolio. Every 3 months we get together and discuss our budget and our savings goals. We both like to use Excel spreadsheets for money management purpose. But for our meetings we put all numbers on the paper, so we can both see our progress.
Prepare a retirement budget and see if you have enough retirement income.
After you set up a budget it will be easier to start working on your retirement budget. The main goal of preparing a retirement budget is to see how to cover your retirement expenses while living on a fixed income.
On average you can live on 70 to 80 percent of your current income in retirement. Preparing a retirement budget will help to see if you have enough money to retire. If you are still working you have time to add to your savings, pay off debt, and change your spending habits.
Save more money.
If you are in your 50s or 60s and still working, it is not too late to save more for retirement. Part of the solution is simple – start saving more by spending less and putting extra cash into retirement accounts.
Start with employer-sponsored plan 401(k).
- How much do you contribute to your 401(k) plan?
- Are you making a catch-up contribution to your retirement account?
I understand that the idea of contributing a portion of your gross pay to a retirement plan makes sense, but maybe not feasible for many women. I hear you. I struggle with it myself. But with every dollar I do not spend today and contribute extra to my 401(k) I make my retirement more financially secure. My goal is to save up to 20 percent of my income.
For 2020, the IRS allows us to save $19,500 a year to a 401(k). For people age 50 and over the IRS allows an additional $6,500 a year contribution. The total contribution limit is $26,000 a year. Also, you can contribute $6,000 a year to an IRA. Additionally, for age 50 and over you can contribute an extra $1,000 a year to an IRA. The total contribution limit is $7,000 a year to an IRA.
Here is a simple example of how to improve your retirement savings. Maxing-out your 401(k) with a catch-up contribution of $6,500 a year and earning a 6 percent average annual return, will help you to accumulate around $97,300 extra in 10 years.
Learn how to invest your savings.
Learning how to invest is important for women of all ages. I read that many baby boomer women are worried about the nut and bolts of investing and making perfect investment choices. However, many studies have shown that women are confident investors when they learn how to do it.
First, you have to decide how to invest within your retirement accounts, including 401(k), IRA, and Roth IRA. It is recommended to invest in the mixture of stocks, bonds, and cash associated with your retirement goals, age, and risk tolerance. A moderate portfolio should include 60 stocks and 40 bonds. If you do not feel confident to invest in individual stocks and bonds you may find it easier to invest in mutual funds.
Second, within your retirement portfolio money should be diversified more to reduce the risk. For stocks, it is recommended to spread your money between large, mid, and small size companies in addition to the international companies and real estate. With bonds, it is recommended to spread money between long-term, mid-term, and short-term US bonds and international bonds.
Talk to a financial advisor.
As a woman, you might take care of the family budget, but your husband always took care of finances and meeting with financial advisors. For years financial planning and investing were your husband’s sole responsibility that is why you never paid enough attention to it. But you need to change it now.
You need to schedule a meeting with your financial advisor and go there with your husband. You need to discuss retirement planning, investment strategies, Social Security strategies, and more. Ask about possible ways to withdraw money from your retirement accounts to minimize taxes and penalties.
You have to be actively engaged in retirement and financial planning meetings with your advisor. Otherwise, if your husband dies you may struggle to understand your financial situation.
Many baby boomers are looking forward to a happy and secure retirement. But the process of preparing for retirement is not the same for everyone. Baby boomer women may have some unique challenges on their way to retirement. That is why retirement planning can be quite different for them.
But the time has never been more right for us as women to take control of our finances. We do not want to put our heads in the sand anymore. We want to take our financial security in our hands even it will take time to learn the nuts and bolts of retirement planning.
Do you feel prepared for retirement? Do you have your own money saved for retirement?
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Disclosure: This information is only educational. I am not providing any specific financial advice or recommendations to any of my readers.