What Every Woman Needs to Know About Retirement

Whether you’re a 30-something in the early years of adulting or a 50-something with retirement edging closer, it’s crucial to plan on living a very, very long time.

Written by Carla Fried / April 26, 2022

Quick Bites

  • Living into your 90s is not as unlikely as you might think.
  • Married? Wives typically outlive husbands, which should figure into your planning.
  • Getting paid what you’re worth and minimizing time away from work will leave you with more resources in retirement.
  • Waiting as long as you can to start collecting Social Security can help ensure you don’t run out of money.
  • Review your retirement goals and budget to see what adjustments you can make to provide for your 85-year-old self.

Our retirement system is built around each one of us coming up with an answer to a hard question: How long do you expect to live?

How long you expect to live should figure into how much you are saving in retirement plans like 401(k)s and IRAs today. It will also loom large—very large—in retirement, as you carefully calibrate withdrawals from your 401(k) and IRA so your money doesn’t run out before you do. Your anticipated longevity should also be front and center when you’re deciding when to begin collecting a Social Security retirement benefit.

Yet women have a very hard time coming up with an answer. When the Transamerica Center for Retirement Studies asked the question last year, 45% of women punted, saying they “weren’t sure.”[1] That’s actually a reasonable answer—talk about existential questions!—but it is also a serious problem.

“The risk of you outliving your money is the biggest retirement planning risk,” says Rachael Burns, a Certified Financial Planner in Folsom, California. When working with new clients, Burns puts longevity front and center—and starts from the assumption that a woman in good health today should plan on living to age 95.

Yep, 95. As explained below, any woman who makes it to 65 has a not-so-slim chance of still being alive past age 90. That potential for a long life—women typically live about five years longer than men—makes it imperative that you build a financial plan that will serve you well decades from now.[2]

“We don’t want to mess up things for your future self,” says Burns, whose firm True Worth Financial Planning specializes in helping women who are navigating divorce or being widowed.

Here’s how you can take steps today to be kinder to your much-older self.

Inside this article

  1. Step 1: Predict what lies ahead
  2. Step 2: Support the older you
  3. Step 3: Invest in your future
  4. Step 4: Review retirement goals

Step 1: Make some predictions about what lies ahead

Wrap your head around what life expectancy stats really mean

Quick quiz: A 65-year-old woman in average health has a life expectancy of 88. Does that mean …

A. She will be dead by age 88.

B. There is a 50% probability she will be alive at age 88.

B is the correct answer.

Life expectancy is an average, not an absolute. If your life expectancy is 88, that means there’s a 50-50 chance you will still be alive at age 88. From a retirement planning perspective, that’s a high probability, so you need to hatch a plan that will provide you with enough income to support you past your “average” life expectancy.

For starters, make sure you aren’t lowballing how long you might live. When the Society of Actuaries (SOA) asked women to estimate their life expectancy, more than 6 in 10 underestimated it by at least five years.[3]

Tip: You can take a spin through the Society of Actuaries’ free online Longevity Illustrator tool to get a life expectancy estimate that factors in your age, smoking habits and health status.

According to the SOA, a 65-year old, nonsmoking woman who is in average health has a 43% chance of being alive at age 90 and a better than one in five probability of being alive at 95. With excellent health, the probability of being alive at 90 rises to 53% and there’s a near one in three chance of being alive at 95.

Plan on being independent

It’s smart to build a retirement plan that assumes you will be on your own late in life, even if you have a partner now. Given that on average women live longer than men, if you’re married to a man you’re likely to be the surviving spouse.

Fifty-four percent of women who are 75 or older report being widowed, compared to 20% of men, according to the Census Bureau’s latest figures.[4] Harvard’s Joint Center for Housing Studies found that once people are at least 80, women account for nearly 75% of the solo households.[5]

Step 2: Take steps to support that older you

Push to be paid what you’re worth

Face it, there’s a gender wage gap, and no single woman can solve that inequity alone. But you should still stand up for yourself by negotiating for a better salary.

Asking for fair pay is not just about having a bigger paycheck now. That salary becomes an anchor for your next raise and a jumping-off point for your next job offer. Your salary determines the size of the company match in your workplace retirement plan. And the higher your income, the bigger your eventual Social Security benefit will be.

Be your own best advocate. Research finds that better negotiation skills can narrow the gender wage gap.

Tip: The online education site Coursera has a free negotiating course, which includes advice from a leading expert on women and negotiations.

Strategize around time off to support family

Taking a few months or years off to raise kids or care for a spouse, partner or aging parent has a jarring impact on retirement security.

Again, it’s not solely the lost salary during that stretch. It’s the lost raises and retirement matches and the lower career earnings that will lead to a lower Social Security benefit. For a young woman today, the real cost of taking a few years off can easily add up to more than $500,000 over a career, according to the Center for American Progress.[6]

Tip: The Center for American Progress has a free tool to estimate the cost of time off to raise children, and it works just as well for older women taking time off to care for a family member.

To the extent possible, consider ways to minimize the hit. See if you can land at a company that provides more generous paid time off and other family care support. Would remote work or flex time make it possible to keep working in some capacity?

Keep saving for retirement during time off from work

Married and taking time off? Contribute to a spousal IRA. Typically the rule for contributing to an IRA is that you must have earned income. That requirement is waived if you file a joint federal tax return with your spouse.

A “non-earning” spouse is allowed to contribute to an IRA as long as the other spouse has earnings at least equal to the contribution amount. In 2022, anyone under the age of 50 can contribute $6,000 to an IRA. The limit is $7,000 if you are at least 50.

Saving $6,000 a year in an IRA for two years when you are 28, and then letting it continue to grow for another 40 years, will leave you with nearly $130,000 in retirement, assuming a 6% annualized return.

Don’t count on working longer

According to the Transamerica Center for Research Studies, more than half of women surveyed in 2021 said they expected to retire after 65; more than one in four have their sight set on working until they are at least 70.[1]

Staying active and engaged is a great goal, but if you plan to work longer because you can’t afford to stop earlier, that’s a red flag. Each year more than 40% of retirees surveyed by the Employee Benefits Research Institute report that they stopped working earlier than planned, perhaps because of a health problem or being pushed out the door at work.[7] The median actual retirement age was 62.

“We don’t want your entire plan and your financial future to hinge on your ability to work longer,” says Russ Thornton, a financial planner in Atlanta, Georgia, and owner of Wealthcare for Women, who specializes in working with single women. His message to clients: “Let’s get you to a place where you can retire sooner, and if you elect to work longer that’s just going to accrue to your benefit.”

Step 3: Keep future you front and center in investing and retirement income decisions

Plan today for needing help tomorrow

Your higher odds of spending your final years solo also means no spouse or partner to help take care of you. It’s crucial for all women—single, partnered or married—to make sure their retirement plan bakes in a way to pay for potential caregiving needs.

Maybe that’s buying long-term care insurance, saving even more in your 401(k) or setting aside money in a health savings account. Or can you plan on selling a home to finance moving into assisted living or managed care?

Maximize your Social Security benefit

You can start collecting Social Security any time between age 62 and age 70. Every month you wait earns you a bigger benefit. Start at 70, and your benefit will be about 75% higher than if you start at 62; that’s a risk-free rate of return you can’t get anywhere today.

And given your odds of living into your 90s, locking in that higher income, which will be adjusted annually for inflation, is like buying yourself insurance against outliving your money.

If you are married, the key is for the spouse with the highest income to delay until age 70. Surviving spouses are entitled to just one benefit: their own, or the benefit of their deceased spouse. Making sure the highest earner waits to get the highest benefit means that highest benefit will be an option for the surviving spouse.

Step 4: Review your retirement goals

The more you save today, the more you will have for what could be a very long retirement. So if you have the ability to push up your 401(k) and IRA savings rate, thinking about your 85- or 90-year-old self may be the nudge you need.

No give in your budget to save more right now? Burns suggests taking a step back to review your retirement goals—what you want to do and how much money that will likely require.

Tip: To help you sort through all the moving pieces of building a longevity-friendly retirement plan, you can hire a financial planner to work on an hourly or project basis, like the ones who belong to the Garrett Planning Network or the XY Planning Network.

When the numbers don’t add up, she frames the planning challenge as a priority setting exercise, telling her clients, “You can adjust your spending now and hit those goals, or you can adjust your goals if you want to continue spending where you are at.”

Even for those who say they are willing to scale back their goals rather than crimp their current spending, Burns brings longevity back to the center of the conversations. “I try to not rob their older self too much in favor of their younger self.”

It may be a few years for the payoff, but in time, your older self will be so very glad if you follow that approach.

Article Sources
  1. “Life in the COVID-19 Pandemic: Women’s Health, Finances, and Retirement Outlook,” Transamerica Center for Retirement Studies, October 2021, https://transamericainstitute.org/docs/default-source/research/women-retirement-security-report.pdf.
  2. “Women’s Financial Challenges Just Got Greater Because of the Covid-19 Pandemic,” Prudential, 2021, https://www.prudential.com/wps/wcm/connect/d2bb41a9-61c2-491d-814e-2aac4b7baefe/Women-Financial-Challenges-Just-Got-Greater.pdf?MOD=AJPERES&CVID=nkdtchy.
  3. “Longevity Perceptions and Drivers: How Americans View Life Expectancy,” Society of Actuaries, 2020, https://www.soa.org/globalassets/assets/files/resources/research-report/2020/longevity-perceptions-drivers.pdf.
  4. “Love and Loss Among Older Adults,” US Census Bureau, April 2021, https://www.census.gov/library/stories/2021/04/love-and-loss-among-older-adults.html.
  5. “The Number of People Living Alone in Their 80s and 90s Is Set to Soar,” Harvard Joint Center for Housing Studies, March 2020, https://www.jchs.harvard.edu/blog/the-number-of-people-living-alone-in-their-80s-and-90s-is-set-to-soar.
  6. “Calculating the Hidden Cost of Interrupting a Career for Child Care,” Center for American Progress, https://www.americanprogress.org/article/calculating-the-hidden-cost-of-interrupting-a-career-for-child-care.
  7. “EBRI 2021 Retirement Confidence Survey: Expectations About Retirement,” Employee Benefits Research Institute, https://www.ebri.org/docs/default-source/rcs/2021-rcs/rcs_21-fs-2.pdf?sfvrsn=2d83a2f_4.

About the Author

Carla Fried

Carla Fried

Carla is an expert on retirement planning and behavioral finance with over 20 years’ experience in personal finance journalism. Her work has been published in Bloomberg, CNBC, Consumer Reports, Money, The New York Times, and other journalism brands.

Full bio

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