“Before anything else, preparation is the key to success.” - Alexander Graham Bell
Determining at what age to retire is a personal decision and that age varies by individual. Many factors go into this decision. In the United States, women generally retire around the age of 66.1 And for some women, there can be significant planning challenges involved in preparing for a single retirement - meaning one without a partner or spouse to share the financial responsibilities. When facing retirement head-on, preparedness is a key component of securing financial stability and independence. Here are four tips that women can use to plan and prepare for a carefree, financially sound retirement.
Tip #1: Have a Plan
A 2020 study found that around 51 percent of unmarried women have not saved for retirement. By comparison, that number drops to 24 percent for married women.2 The problem is that it is very likely you will be spending 10, 20, 30+ years in retirement, so having adequate savings is the key to success. The Department of Labor recommends that retirees prepare to live on 70 to 90 percent of their pre-retirement income in order to maintain their usual standard of living. This is just a "rule of thumb" and not a substitute for a retirement plan.
If you’re living on a single income, saving for retirement may be extra challenging. Developing a plan with plenty of time to prepare can help improve your chances of achieving your retirement goals.
Tip #2: Prepare For Long-Term Care
Someone that is turning 65 today will have almost a 70 percent chance of needing some type of long-term care services and support in the coming years.3
With that being said, it may be beneficial to consider a long-term care (LTC) insurance policy to help cover such costs. Even if you have family or friends who can help, long-term sickness or injury may require care beyond what your family can help with physically and financially. How will you be cared for and who will pay for the care? Assisted living and long-term assistance can be incredibly expensive.
According to a recent article in Forbes, new hybrid “combo” policies now represent about 80% of total LTC policies. What is a hybrid policy? It is an insurance policy that links a permanent life insurance policy with long-term-care benefits that offer more choice, more control, and improved consumer benefits. Many are finding these types of policies to be a good fit for their personal situation.
Tip #3: Consider Delaying Social Security Benefits
Social Security provides benefits and financial protection for women with almost 55 percent of the people receiving Social Security benefits being women.4 And it provides an inflation-protected benefit that will last as long as you live. When it comes to drawing from Social Security, it is advisable to delay this for as long as you can - preferably to the age of 70.
If you can delay until that age, your income will increase significantly each year. The credit for delaying Social Security is 8% for each year that you delay past your full retirement age (FRA). Even though your Social Security benefits can be claimed as early as age 62, your full retirement benefits will only be available once you reach your FRA, which is determined by the year of your birth. Any benefits that are received before reaching your full retirement age are reduced by a percentage, which is also determined by the year of your birth. This ranges between 25 and 30 percent.5
According to the Social Security Administration, the reduction in benefits is typically permanent. If you were to claim your benefits at 62, the percentage removed would remain even after you have reached your full retirement age.6
However, if you were to wait longer than your full retirement age to claim your benefits, you receive the delayed credits (8% per year), up to the age of 70.6 Delaying the start of Social Security benefits can put hundreds of thousands of dollars more into your pocket over your lifetime when compared to claiming your benefits early.
Tip #4: Build a Network of Friends and Acquaintances
You may find yourself bored or lonely once you retire, so establishing friendships and acquaintances is a great way to find new activities and friends. In fact, studies have shown that strong friendships can actually improve your health and prolong your life.7
Some ways to build new friends and acquaintances could include:
- Attending local events
- Starting a new hobby or interest
- Joining a walking or exercising group
Retirement planning can be difficult enough as it is, but this can substantially escalate for single women. With proper planning, however, you can create a stronger future for yourself. And as always, speak with a financial professional if you have any questions.
This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.