Women’s increasing longevity highlights the importance of preparing financially for those extra years. “We tend to prioritize our families’ financial needs,” says Marci McGregor, senior investment strategist, Chief Investment Office, Merrill and Bank of America Private Bank. “In the process, we can sometimes lose sight of our own financial future, and with our increasing longevity, that can put us at risk of outliving our assets,” she adds.
If you feel like progress toward your retirement savings goals has slowed, the tips below from McGregor and several other Merrill women senior leaders can help you get back on track.
Q: What strategies can women use to save for retirement, especially if they have taken time out of the workforce to care for family?
A: First, make saving for your future a top priority. “We have found that women are often more focused on near-term financial goals and less focused on retirement,” says Stacy Bucchere, head of business enablement and client management, Merrill Wealth Solutions. One tip that can help: “A lot of people save whatever is left after they pay bills and spend. We recommend you flip that on its head,” says Nancy Fahmy, head of alternative investments and specialty asset management, Bank of America. “Put a little away for yourself first. Then pay your bills. Spending any disposable income should come last.”
“Make use of all available retirement savings vehicles,” adds McGregor. These could include Roth IRAs or your employer’s 401(k). “Set up automatic contributions from each paycheck and consider automatically increasing the amount you contribute to your retirement accounts each year,” McGregor adds.
Q: How can women investors balance the need for growth and income in retirement?
A: “Pursuing growth a little more aggressively could help women investors be better prepared for retirement,” says Fahmy. “Taking some risk is essential to growing the value of your investments and keeping up with inflation.”
A financial advisor can help you determine an asset allocation that takes into account your risk tolerance, the time you have until retirement, and your cash, or liquidity, needs, adds Ninon Marapachi, head of asset manager relationships, Investment Solutions Group, Bank of America.
Q: What should women consider as they begin to withdraw their assets in retirement?
A: “By the time women reach the age of 85, they outnumber men who have reached that age by two to one,” says McGregor. So women need to be planning on making their savings last for more years than men, on average. Work with your advisor to determine a withdrawal rate that is based on factors specific to your situation, she suggests.
Bucchere tells clients to start by taking an inventory of all their income sources. “Add up your essential expenses and weigh them against your sources of guaranteed income,” she says. “Then work with your advisor to figure out how the assets in your retirement accounts can help you fill in the gaps.”
Keep in mind that as women age, “we spend more on health care, and medical costs have risen much faster than regular inflation recently — closer to 7% than 2%. You have to factor that into your planning,” says Amanda Lasher-Ross, head of wealth management retirement sales support, Bank of America. You might look into opening a health savings account, she suggests. When used along with a high-deductible health insurance plan, “it is a tax-efficient way to help you save for medical expenses.” And looking at long-term care insurance might also be prudent, she suggests.
Q: Are there any solutions that can help to create a retirement income stream?
A: You could look into annuities, suggests Lasher-Ross. Insurance contracts that can offer guaranteed monthly income, “annuities are a useful tool to help protect against the risk of outliving your retirement savings,” she notes. “You invest today and use the income they produce later to fill any gaps you have between your essential expenses and your other sources of guaranteed income.”
Q: What is the best age for women to claim Social Security?
A: “Get educated early on the strategies to optimize your Social Security benefits,” says Lasher- Ross. “It is one of the few sources out there of guaranteed income.” While you may be eligible to claim benefits as early as age 60, depending on your work and marital status, it may make sense to wait for several more years, or even a decade.
Longevity can work to your advantage, say all the women leaders. The longer you have to invest, the more time your assets have to potentially grow. Discussing all of the strategies above with your financial advisor can help you be better prepared to make the most of a long and fulfilling retirement.
For more information, contact Merrill Lynch Financial Advisor Jeffery D. Price of Price & Associates office at [email protected] or (817)-410-4940.