How Women Can Afford to Live to 100

The number of 100-year-olds in the U.S. is expected to rise exponentially over the next few decades, and a vast majority of them are and will continue to be women. As of 2016, the U.S. Census Bureau counts 82,000 centenarians, with 80.5 percent being female. By 2060, that number is projected to hit 590,000, and the women’s share will dip to 71.5 percent.

With so many people able to look forward to much longer lives, longevity risk is becoming a bigger concern. And women especially need to consider it when devising their financial plans, even if their age never quite tops three figures.

“Clearly women live longer,” says Sharon Oberlander, a Chicago-based financial advisor with financial services firm Merrill Lynch, noting that women, on average, live five years longer than men, according to the National Center for Health Statistics. “Many of them are afraid of running out of money – and they probably have a good reason to be afraid.”

Indeed, women report having a median of just $42,000 in total household retirement savings, compared with $123,000 among men, according to Transamerica Center for Retirement Studies.

Why might women’s retirement savings be lagging? It starts on the income side of the equation. The wage gap is well-documented: For every dollar a man earns, a woman makes just 82 cents, based on median weekly earnings as reported by the Bureau of Labor Statistics. Black and Hispanic women tend to earn even less, making 70 cents and 64 cents, respectively, for every dollar a man makes, according to the BLS.

Plus, “women have a different life journey than men,” Oberlander says. In a study conducted with Merrill Lynch, Age Wave – a research firm focused on the aging population – estimates that the average woman spends 44 percent of her adult life taking time out of the workforce compared with just 28 percent for men. And that time isn’t a vacation: It’s often spent caring first for children, then parents and finally spouses. Over a lifetime of work, the pay gap and the care gap add up to the average woman collecting $1.1 million less pay than the average man. Note, too, that the additional time out of the workforce leads to lower Social Security benefits in retirement.

Given that huge disadvantage, it’s imperative that you take action and tackle the problem now. Starting to save and invest sooner gives your money more time to grow. Consider this: If you start saving $100 a month when you’re 25 years old, assuming an 8 percent return and monthly compounding, you’d have about $18,417 after 10 years. If you just let that money ride, without adding another penny yourself, you’d wind up with $201,403 by age 65. But if you wait until you’re 45 years old to start saving $250 a month, given the same assumptions, you’d have just $148,237 by age 65 – despite continuously saving for 20 years. As Oberlander puts it, “the compounding power of money is such a powerful force.”

That’s why starting to save and invest as soon as possible is key. And “ASAP” has no age limits. Financial planner Marguerita Cheng, chief executive officer of wealth management firm Blue Ocean Global Wealth in Gaithersburg, Maryland, says that her daughter began contributing to a 401(k) when she was just 19, and Cheng’s mother opened a Roth IRA when she was 72. “It’s never too early to start saving,” she says. “It’s never too late to start either.”

No matter your age, you want to contribute as much as you can to a 401(k) or similar employer-sponsored retirement plan if one is available to you, as well as an individual retirement account. In 2018, the IRS-set contribution limit for a 401(k) is $18,500 and $5,500 for an IRA. If you’re age 50 or older, you can save even more: The catch-up contribution limits allow an additional $6,000 and $1,000, respectively.

For women who do not work outside of the home but have a spouse who does, Cheng recommends taking advantage of a spousal IRA. This type of account is the same as any traditional or Roth IRA, but the owner of the account does not need to have earned income in order to contribute to it. As long as you file a joint tax return, the working spouse may contribute up to the maximum allowed amount.

Also, take the time to learn as much as you can about your own financial situation as well as finance in general. Especially among older heterosexual couples, women tend to delegate long-term financial planning responsibilities to their husbands. “Very frequently, they know more about the budgeting and family expenses,” Oberlander says. “They just need to be more focused on the reality of what’s going to happen down the road, that they’re going to be in charge and that they’re going to need to take care of themselves.”

Working with a financial professional can help you take that long view and get a better understanding of financial matters. Unfortunately, the financial-services industry has historically catered to men. For example, the Merrill Lynch-Age Wave study notes how retirement savings calculators are typically not built to account for time spent out of the workforce, and financial planning models often default to men’s pay, timelines and preferences.

If you choose to work with a pro, be sure to thoroughly vet several candidates, asking about their fees, philosophies, approaches and strategies. These initial conversations can give you a good sense of how comfortable you’ll be working with them. “Women should select financial professionals that they feel truly understand their life goals and can help them make smart financial decisions for the future,” says Heather Lord, senior vice president at financial-services company Capital Group, via email.

Whether you get professional help or go it alone, and no matter where you are on your financial path now, you need to take control of where you’re headed. That means taking stock of your current financial situation and establishing a plan to achieve all your financial goals.

“Women are resilient, but I think they need to get educated, understand all the facts and not be an ostrich … you don’t want to hide your head in the sand,” Oberlander says. “Whatever plan it is you make, even if you don’t achieve it, you will be so much farther ahead for having made and trying to execute it.”

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