Women face unique challenges in their quest for financial freedom, which means a successful retirement plan could look different for your female clients. How can you help ensure they meet their goals?

You probably know that women live longer than men— statistically, almost 5.5 years longer¹ as of 2022—increasing their need for long-term income. They’re also more likely to take breaks during working years to care for others.² Gaps in work create periods when they are not contributing to a 401(k) and/or Social Security. This means they’ll receive less from these traditional retirement-income sources. In many cases, they may not work outside the home at all. So, what can all this mean when it comes to helping women plan for retirement?

Here are four key considerations as you prepare to meet with female clients: 

1. Does the plan have a savings and income strategy for whether a woman is in the workforce or working inside the home?

Not being in the workforce, even temporarily, will have an impact on retirement resources. Think about:

• Spousal IRAs—A spouse with earned income can contribute to a spousal IRA. Converting that to a backdoor Roth IRA may be an option for those without other traditional IRA assets, creating tax-free income once initial taxes are paid on growth in the IRA.
  
  
• Annuities—If there are other liquid assets, a taxdeferred annuity can add additional tax-deferred growth with the promise of income for life. If market volatility is a concern, consider an option such as a registered index-linked annuity that offers a level of protection against loss, or fixed indexed annuities that RETIREMENT PLANNING offer some growth potential with no loss of principal due to market losses. For the truly risk-averse, there are fixed-rate annuities as well.
  
  
• Social Security complement—Annuities and IRAs can offer income that may help offset lower Social Security retirement benefits. Remember that if there are not 35 years of earnings, the Social Security retirement benefit can be affected.

Any income that replaces a zero or low-income period can help make up for breaks in work history. For some clients, adding guaranteed future income to the plan may complement their existing benefits.

2. Does the plan offer a flexible strategy for addressing longevity?

Longer life spans mean women need to plan 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:

• Claiming strategy—One claims, one waits. Typically, the spouse with the lower benefit might claim Social Security retirement benefits at age 62 and the other person would delay to full retirement age or, to maximize the income with delayed retirement credits, to age 70. The first Social Security retirement benefit may provide the cash-flow needed for the bridge years.
  
  
• Payout annuity—An immediate annuity’s Period Certain income option can provide income for the bridge years. If nonqualified assets are used to purchase it, the exclusion-ratio rules can provide tax-advantaged cash flow. There is a trade-off; the funds are no longer liquid. Be sure the client understands these limits.
  
  
• Living benefit optional income protection—Variable, fixed-indexed, and registered index-linked annuities may offer optional benefits that protect income. Clients might use a protected income benefit for a Social Security bridge, then stop or reduce that income when Social Security retirement benefits are claimed. The remaining assets can provide a hedge for later-life income.

3. If your client files a tax return using married filing jointly, does the plan consider how taxes change when the first person passes away?

Married clients typically file a joint tax return. This means that taxes are based on the married-filing-jointly brackets that have higher thresholds for government benefits— Medicare, for example. When the first spouse dies, the survivor may find that the same or similar income means higher income taxes and additional Medicare premiums. Having tax-free income from a Roth IRA or tax-advantaged income from an annuity may help.

4. Is there a monitoring plan in place to address changes as the client moves through life?

For women, it can be especially important to review and adjust the plan. As examples, a decision to care for children or an elderly parent, or a decision to start a business, could mean a plan update is required.

Regular Reviews Are Important

It is important for your female clients, who will likely live longer than men and also spend more time outside the workforce, to review their long-term financial strategies on an annual basis. The Mother’s Day month of May might be an ideal time to reach out for meetings. With all the choices available, this is a great opportunity to help support a long, successful retirement for more women.

ACTIONS YOU CAN TAKE RIGHT NOW

• Identify both single and married female clients to see if the plan in place for retirement answers the four questions above.
  
  
• Meet with female clients to explore their working histories and plans. Are gaps anticipated or possible due to the needs of family for caregiving or other reasons?
  
  
• Evaluate whether an annuity, IRA, spousal IRA, or Roth IRA could help ensure a well-rounded plan that includes an adequate amount of income that would last for life.

Additional Resources and Links

Living Longer: Historical and Projected Life Expectancy in the United States, 1960 to 2060

Retirement Planning for Women

Retirement Income Cap Calculator

Create Lifetime Income

An Opportunity to Fund Retirement with a Roth IRA

For more information about retirement-planning, please contact our Retirement Strategies Group at RSG@PacificLife.com or (800) 722-2333, ext. 3939. PacificLife.com

This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice. Information is based on current laws, which are subject to change at any time. Clients should consult with their accounting or tax professionals for guidance regarding their specific financial situations.

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This material is educational and intended for an audience with financial services knowledge.

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