Statistically, women live longer. They’re also more likely to take breaks during working years to care for others. Should this change how they plan for retirement? The short answer is–yes.
Women may need a different plan to create a successful retirement. Why? Women often have gaps in outside work, creating periods when they are not contributing to an employer plan, such as a 401(k) and Social Security. They also may reduce work to help care for family members.
How can a financial professional help? Here are four important questions to consider before making annual recommendations to your female clients.
It is more likely that a woman will take time off during her working years. No work means no employer retirement plan. Here are some options:
Women tend to live longer. That means planning for a longer retirement. Waiting to claim Social Security retirement benefits can provide a higher cost-of-living adjustment (COLA) longevity hedge. But that means either working longer or creating a plan for a Social Security bridge. Here are some options for creating a Social Security bridge:
Married clients typically file a joint tax return. This means that taxes are based on the Married Filing Jointly brackets which have higher thresholds for government benefits, such as Medicare. When the first spouse dies, the survivor often finds that the same (or similar) income means higher income taxes and additional Medicare premiums. For some clients, having tax-free income from a Roth IRA or tax-advantaged income from a payout annuity may help.
For women, it can be especially important to review and adjust the plan. As examples, a decision to stay home with children or a decision to start a business could mean a plan update is required.
It is important for your female clients to plan and to review those strategies on an annual basis. What better time than Women's History Month for this annual event! With all the choices available, this is a great opportunity to support a long, successful retirement for more women.
For more information about retirement-planning, please contact our Retirement Strategies Group at RSG@PacificLife.com or (800) 722-2333, ext. 3939. PacificLife.com
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