Of the roughly 4 million Americans who are expected to retire in 2026, approximately 1.9 million will be women, and more of these women will be single, independent women than in past years. For example, in 2021, according to the Pew Research Center, 22% of 40-year-old women in the US had never been married. This trend seems poised to continue, with an analysis of 2024 census data indicating that as many as 31% of women in the US may never marry. Add to this the number of retiring women who are divorced or widowed, and the number of independent women entering retirement becomes even more significant.
It’s important to understand that the retirement playing field for women is quite different from that for their male counterparts. Consider these facts:
- Women’s average retirement age is 62.6; for men the average is 64.6.
- Women can typically expect to live 2–3 years longer in retirement than men of the same age.
- Women typically come to retirement with less in savings than men.
- Women spend 14% fewer years in the workforce, on average, than their male counterparts, due to a disproportionate share of time spent as care providers.
Are Women’s Retirement Needs Different than Men’s?
For these and other reasons, single and independent women require special consideration in their retirement readiness planning. Because they are typically funding longer retirements with fewer financial resources, women’s financial planning must include different assumptions, different cash-flow modeling, and a different approach than what is typical for men.
Retirement is also one of the biggest transitions any of us will ever make, and that means it should be approached with careful planning and a strategy designed with your individual needs, goals, values, and resources in mind. Most of us wouldn’t take a long trip without thinking about where we’re going, how long it will take to get there, and what the weather will be like at the destination. Similarly, retirement requires a dependable roadmap, a careful inventory of what we need to “pack,” and a reliable “vehicle” to take us where we mean to go.
Retirement Readiness for Women
Often, the first thing we need to address is women’s assumptions about retirement. Several studies have demonstrated that women typically don’t think they’ll need as much money as men, despite the fact that they are likely to live longer. A recent study by Transamerica found that women, on average, believe they will need a median amount of $500,000 in savings to retire. Their male counterparts, meanwhile, estimate needing $750,000.
Women are also prone to require more information around investment options and financial strategies than men. This does not mean, however, that they are less adept at investing. In fact, research demonstrates that, contrary to stereotypes, women are often better investors than their male counterparts, but their needs and challenges are different. Knowing the implications of these differences is a huge advantage for women’s financial confidence as they plan their career transitions.
On the other hand, women’s vision of a successful retirement differs from that exhibited by most men. Women associate financial success more with desired lifestyle outcomes than with a particular account balance. They are more apt to view their goals in terms of being able to live as they wish and to spend their time as they desire. These goals often involve relationships with children, friends, and other valued persons. Men, on the other hand, tend to center their goals around reaching certain financial thresholds. In other words, it may be especially important for women to have a clear vision of what they’re retiring “to,” not just what they’re retiring “from.” Spend some time thinking carefully about what a successful, satisfying requirement looks like to you:
- Will you spend more time volunteering for causes that are important to you?
- Do you have a travel “bucket list”?
- Is time with grandkids or other family members at the top of your priority list?
- Some retirees even look forward to launching a post-retirement “career,” perhaps turning a beloved hobby into a source of income.
- You may even be among those who desire a “partial” retirement: working part-time or for a lower salary at doing something you’ve always enjoyed.
The point is, you need to be clear on your “why” as you prepare for retirement. The money and investments may be the “how,” but the “why” matters just as much, if not more. So, successful retirement planning should start with a clear vision of your desired outcomes; this then provides the context for financial planning strategies that supports your priorities.
Preparing for Retirement: A Five-Year Plan
For these and other reasons, it is often helpful for independent women to establish a clear structure for retirement that is built around their individual resources and assumptions. Let’s take a look at a five-year plan to help you get ready for that “dream retirement.”
Five years out: The first step in any journey is to figure out exactly where you are. Begin gathering the necessary information and resources, starting with a careful assessment of current financial resources that includes savings and investments.
- Retirement accounts. Funding the desired retirement lifestyle will be enhanced by maximizing contributions to retirement accounts such as IRAs, 401(k)s, and 403(b)s, as available. But if you haven’t saved enough, you can make up some ground by taking advantage of every “catch up” option that might be available to you. Recent legislation has added lots of different twists to age based additional contribution limits to retirement plans, and help from a financial advisor could be beneficial. Finally, if you have additional income to save for retirement beyond what you can put into tax qualified retirement accounts, you can always save into a taxable brokerage account and manage it as part of your retirement portfolio.
- Social Security and pensions. It will also be important to analyze the various options for claiming Social Security in order to get the most from this important benefit. Any available pensions or other sources of regular income should also be considered. In fact, early retirement planning should include working with your employer’s HR or pension specialists to ensure that your pension income will begin when it is needed. Those who will qualify for Social Security payments will want to make sure they are properly registered to begin receiving benefits at the time most advantageous for them. Those born in 1960 or later reach full retirement age for Social Security at 67. Women who are divorced or widowed and have not remarried may qualify for spousal Social Security benefits.
- Healthcare coverage. Age 65 is the beginning of eligibility for basic Medicare coverage, which provides benefits for hospital care, certain chronic illnesses, rehabilitative care, and certain other basic medical expenses. Depending on what is offered by the employer, women may also qualify for retiree health benefits; they should check with their employer’s HR department to learn what is available, how much it costs, and what is needed to obtain coverage.
- Budget forecasting. This is also the time to forecast spending and expense patterns and refine your retirement budget. For example, many retirees spend more in the early years on travel, hobbies, and other active pursuits than they anticipated; conversely, in later years, medical and healthcare expenses may absorb more of the budget than anticipated. As you begin planning for your retirement, it’s an optimal time to adjust your budget forecasts to reflect these new realities.
- Adjust your investments to your retirement “glidepath.” As you are moving closer to retirement, you should revise your investment strategy to ensure a smooth transition from receiving a salary to living on your investment earnings. A vital consideration here is managing what is called “sequence-of-returns risk”: protecting your portfolio as much as possible from early-retirement market downturns. Experiencing poor market returns early in retirement can actually have a greater magnifying effect than poor markets in the later years. Especially when the market is tracking lower, withdrawing assets that are losing value can have a “double-negative” effect on how long retirement funds will hold up; not only are retirees often taking an actual loss, but drawing down assets in a down market also reduces their ability to benefit from a subsequent upturn in the markets. Prospective retirees should keep one to two years in fairly liquid cash equivalents like money markets and CDs, and another one to two years in short term investments to avoid selling assets at a loss during a down market. The point is, managing investments for current income needs requires a different approach than managing investments for savings and growth. Depending on your feelings about how you want to generate your retirement “paycheck,” there are two fundamental approaches to consider:
- Using income-generating assets like dividend paying stocks, bonds and bond ladders, and other securities designed to produce regular cash distributions, or;
- Taking a “total return” approach that divides the overall portfolio into different investment “buckets” based on the timeframe when the income will be needed: short-term (cash and cash equivalents), mid-term (bonds and less voltile equities) and long-term (equities and other assets position for growth over time), that can be accessed in the most advantageous sequence and are rebalanced each year.
The point is, these considerations need to take place well before retirement so that you have adequate time to position your investments according to your anticipated needs in retirement.
Women and long-term care. Because women statistically live longer than men, they are more likely to require long-term care at some point in their later years. According to WiserWomen.org, “Women spend twice as many years in a disabled state as men do: 2.8 years if they live past 65, 3 years if they live past 80.” It’s important to keep in mind that most long-term care costs are not covered by Medicare. Medicaid does cover some of these costs, but that government program is only available to persons of very limited means. And the potential costs of long-term care are significant. According to long-term care insurance (LTCI) provider Genworth, costs for services like extended stays in a nursing home, home health aides, or adult assisted-living facilities can range from $19,500 to more than $100,000 per year. Because of this, the purchase of LTCI may be especially advisable for independent women approaching retirement. Like any insurance, the younger and healthier you are when you make the purchase, the less your premiums will be. But coverage and costs vary among different products, so it’s vital to carefully compare.
As you enter these early stages of retirement planning, one of the best things you can do for yourself is to secure the services of a professional, fiduciary financial planner. Your planner can help you develop a plan and strategy built around your unique resources, goals, needs, and priorities. A fiduciary planner is obligated to provide advice that places your best interests foremost, serving as a valuable “traveling companion” as you plan your route to a successful retirement.
Four Years Out: At this point, you should starting firming up plans for where you intend your “home base” to be.
- Some retirees relocate, either because they prefer a different part of the country (i.e., “beach people” and “mountain people”), to be closer to family, or to live in an area with lower costs of living. Whatever your motive, you should do all the necessary research and begin planning the timing and logistics of your relocation, including tax implications.
- If you plan to sell your current home, decide whether the proceeds will be re-invested in another home or used to pay for residence in a retirement community. You will also want to consider the current and future state of the real estate market in order to get the most from your sale.
- You may even want to use this time to visit your target area, getting a sense of what everyday life is like and what amenities are present or lacking.
- If you intend to “retire in place,” consider any modifications that might be required to make your home more comfortable or navigable. Some retirees may need to add ramps, walk-in baths, or other accessories to prevent mobility challenges.
- Continue adjusting your investment portfolio in light of these considerations.
Three Years Out: Now that you are finalizing where you plan to live, review your spending needs as compared with your projected income, including your Social Security and any available pension benefits.
- Continue to refine your anticipated retirement budget;
- Forecast the available cash flow from your investments and retirement accounts and make any needed adjustments (preferably with the guidance of your fiduciary financial planner).
- Make a decision about when you will start receiving Social Security benefits.
- Full retirement age is 67 for those born in 1960 or later, however;
- You may begin receiving benefits as early as age 62.
- Delaying the start of benefits past full retirement age increases Social Security income by about 8% per year until maximizing at age 70.
- Once you begin receiving benefits, your monthly payment will remain the same for the rest of your life.
- Early retirement (prior to eligibility for Social Security or available pension benefits) will increase your reliance on your other investments, which increases the importance of managing sequence-of-returns risk.
- Portfolio adjustment in light of your decisions should be ongoing.
Two Years Out: As retirement comes into clearer focus, review your vision, goals and plan. Have your priorities changed? Has a change in your health or your family situation altered your needs? Also, this is a good time to
- Look more carefully into healthcare costs and coverage for your area;
- Finalize relocation plans, if any.
One Year Out: By now, you should have made most of your adjustments to your portfolio and you should know where you plan to live in retirement. At this point,
- You should begin completing the retirement paperwork required by your employer;
- Register for any available pensions;
- If eligible, register for Social Security (3–4 months before desired retirement date)
- If eligible, register for Medicare (3 months before and after 65th birthday)
This may also be a good time to take a “practice run” at living on your projected retirement budget. If this turns up the need for any adjustments to your income or spending plans, you still have a little time to make them.
You should also start setting up your post-retirement calendar: What do you want to do in those first few days or weeks that you’re no longer “clocking in”? Who do you want to spend your extra time with?
Finally, resist the urge to immediately start “joining.” No doubt, there are many things you’ve been wishing you had more time for, but give yourself plenty of time to think carefully before you start making commitments. Otherwise, you’ll be one of the many people who find themselves saying, “I’m busier in retirement than I was when I was working!”
Getting the Right Advice
Of course, retirement isn’t a “set-it-and-forget-it” affair, either during the five years prior or at any point thereafter. That means that having the right advice and guidance, both leading up to and in retirement, can be a huge advantage. As a fiduciary financial planner and wealth advisor, Equila Financial works with clients to develop personalized strategies that keep the client’s best interests foremost. If you’ve got questions, let me help you get the answers you need.
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Disclosure: This blog post was prepared by a third-party marketing firm on behalf of the firm. The information provided is for educational and informational purposes only and should not be construed as personalized investment, legal, or tax advice. Readers should consult with a qualified professional regarding their individual circumstances.
