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Retirement can be a financially complex phase of life, and many women are ill-prepared due to a lack of financial literacy. A recent report by American College of Financial Services found that 89% of women failed a literacy quiz in retirement and only 1 in 3 women had a formal retirement plan in place. In today’s “Financially Savvy Woman†column, we chat with Hilary Fiorella, Executive Director of the Center for Women in Financial Services at the American College of Financial Services, about key knowledge gaps in women and of retirement.
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Only 14% of women feel well informed about planning for retirement income
One of the most important aspects of planning for retirement is knowing where you can earn your income and how best to do it to last through your retirement years. Yet many women do not have this knowledge.
“The first thing to do is to get a [retirement income] plan by working with a knowledgeable and educated professional, â€said Fiorella. “There are probably six, seven, or eight categories that you should really focus on, and when you sit down with your advisor, they can walk you through the pros and cons of each.”
Fiorella notes that women face unique challenges when it comes to crafting a retirement income plan.
“Women usually have gaps in their earnings – we call it volatile earnings,†she said. “We can be a lagging spouse, we can change jobs, we can have caregiving responsibilities, we can have a child, we can take care of a family member, so we take breaks. . This can spill over into a smaller retirement account and we may have lower net worth. And women are living longer and spending more time in retirement, so they’re going to need more assets. When sitting down with your pro, be sure to factor in cash flow issues specific to women: longer lifespan, income gaps, and lower net worth. “
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Only 20% of women feel very well informed about social security
Social security is often one of the sources of income women rely on in retirement, but many women do not fully understand how the program works and how to optimize their benefits. And many women wait too long to start thinking when they start collecting Social Security.
“You should be thinking about social security probably 10 or 15 years from retirement,†Fiorella said.
Another mistake women make is taking social security too early.
“Just because you can doesn’t mean you should,†Fiorella said. “The longer women can wait, the better. Each year after you reach retirement age, if you continue to delay, you will receive 8% more each year until age 70. It can be really critical in the last few years.
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Only 10% of women feel educated about annuity products
“If you don’t have other sources of income – if you don’t have a pension, if you don’t have 401 (k), if your social security is not enough to cover your expenses – your professional advisor may decide that an annuity is great for you for that guaranteed income, â€Fiorella said. “Annuities are covered a lot these days and there are people on both sides of the fence with annuities, but I think annuities can play a very important role in terms of long-term guaranteed income in retirement. There are many different options at different prices. You should definitely explore annuities if you need guaranteed income in retirement.
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Only 12% of women feel very well informed about long-term care
Having a plan to cover the cost of long-term care may be part of your retirement plan, but women are undereducated on the subject and only 27% have a plan to fund long-term care.
“Men generally have insurance, women less, so it’s a big gap for some women,†Fiorella said. “If you need it when you retire, if it’s part of your retirement plan, then you should think about it and talk to your professional. “
Other retirement topics women need to understand
Here are some other topics related to your finances and retirement that you should learn about.
Related: 3 Alarming Ways Women Are Lagging behind Men When It Comes To Their Finances
Health insurance
“When it comes to health insurance, women are concerned, but women are generally more educated [than men] about health care and what Medicare is and what Medicare pays just because we are usually more tuned in when taking care of our family or extended family “Said Fiorella.
Still, Fiorella said it’s critical for women to have a plan for their health care coverage in retirement.
“Look for a health insurance specialist nine months before you retire to make sure you have the right coverage,†she said. “Be aware that if you plan to retire before age 65, Medicare does not take effect until age 65. So if you are retiring before age 65, make sure you have COBRA insurance or gap insurance – something in place. Talk to a professional. There are assurances that can fill this gap if necessary.
Read: 3 Money Moves Every Woman Should Make, According To Rachel Cruze
Life insurance
The study found that just over 6 in 10 women have life insurance compared to 7 in 10 men. Interestingly, African American women are more likely to have life insurance than other groups.
“Life insurance is very important to African American women, 6 in 10 say it is very important for planning for their retirement and more than a third say it is extremely important,†said Fiorella . “African-American women are also more likely to report having life insurance than non-African-American women. “
See: How To Manage Your Finances If You’re Newly Single or Divorced
Estate planning
“Make sure you have an enduring power of attorney, you have an advanced medical directive, a will and a trust,†Fiorella said.
Your estate plan should also take into account any philanthropic gifts you may wish to make.
“Women are generally more philanthropic than men, so a lot of retired women want to leave a legacy or think about where they want to leave their money,†Fiorella said. “When you think about estate planning, also think 10 to 15 years before your retirement about your philanthropic goals. “
GOBankingRates wants to empower women to take control of their finances. According to the latest statistics, women hold $ 72 billion in private wealth, but fewer women than men consider themselves to be in “good” or “excellent” financial position. Women are less likely to invest and are more likely to take on debt, and women still earn less than men overall. Our “Financially Savvy Woman†column will explore the reasons for these inequalities and suggest solutions to change them. We believe financial equality starts with financial literacy, which is why we provide tools and advice for women, by women, to take control of their money and help them live richer lives.
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