4 smart ways women can start planning for retirement before they run out of time
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- Women live longer than men and are often the primary breadwinners, making it especially important to plan for the future.
- Review your financial situation, 401k, and life insurance coverage annually, and plan to go into retirement debt-free.
- If you’re in your 40s or older, it’s a good time to look into long-term care insurance to cover the cost of in-home aid or assisted living down the line.
- Consult a financial planner on how to maximize your current budget to maintain the lifestyle you want later in life.
- Check out Vanguard Personal Advisor Services® to get the investment advice you need to help build the life you want »
Women live longer than men and 40% of American households have a woman as the primary breadwinner. A woman will most likely outlive her male partner and may also be a caregiver for elderly parents. This makes it especially important for a woman to plan in advance for how you’ll live and guard your health later in life.
“The only person to take care of the older woman you will become is the young woman you are today,” says Barbara Pietrangelo, a certified financial planner and life insurance specialist with Prudential. “Your adult kids might have stuff going on and can’t do it. You can be young without money, but not old without money,” she added.
Here are four steps you can take now to start planning for the future and your retirement.
1. Evaluate your finances and life insurance annually
Life insurance is one good way for women to plan today for how they want to live in the future. Pietrangelo recommends women look into hybrid permanent life insurance policies that incorporate long-term care so that you have choices about and control over how you live later in life.
If you don’t have life insurance yet, Pietrangelo said her first question is whether you’re married, single, or have kids, because your needs will vary depending on your answer. The follow-up question: Based on your financial situation and what you’re currently doing, do you know what your retirement income will look like?
It’s important to evaluate these things while you are in good health, because life insurance is cheaper when you’re younger and have fewer health issues. If you wait until after you have a health scare or your health deteriorates, it will be expensive. For example, she noted that if you have cancer, you can get life insurance, but it typically requires a five-year wait.
The goal is to have choices and control over how you live your life in retirement.
Pietrangelo said that she has some clients who plan to spend their retirement living on a cruise ship because the cost is cheaper than a nursing home and beats being in an institution. She said that how you spend your money matters more than how much money you make — you can have a $500,000 salary and be unable to retire due to poor spending habits.
She gave the example of a single client who planned her retirement so that she could take two trips a year. That client only made $35,000 a year but was able to retire by brown-bagging her lunch and taking walks instead of paying gym fees. That client had a budget, kept an affordable car, and bought a condo with reasonable monthly fees that she could still afford after retirement. When she retired, her lifestyle didn’t have to change.
Pietrangelo noted that particular client’s budget doesn’t work for everyone, but there are other ways to save. The goal should be to do well financially and be willing to make the sacrifices to fund and sustain yourself in the future.
Any adult in their 40s should consider long-term care insurance as part of their retirement package. Long-term care can be an in-home caregiver, assisted living, or nursing home. If you are concerned about your own care as you age, long-term care insurance is peace of mind, as Medicare and Social Security only pays for long-term care in special circumstances and for a limited time.
According to the US Department of Health and Human Services, “unlike traditional health insurance, long-term care insurance is designed to cover long-term services and supports, including personal and custodial care.” If you are in poor health or already receiving long-term care services, the site notes, you may not qualify for long-term care insurance as most individual policies require medical underwriting.
If you do not have long-term care insurance, you will pay out-of-pocket for in-home care, assisted living, or a nursing facility, unless you are relying on relatives to care for you.
Pietrangelo suggests finding a financial planner who understands hybrid whole life insurance policies for long-term care and is well-versed in the life insurance space. She said a financial planner will want to know your big picture — is it just you, or will you also be taking care of your elderly parents? Stuff happens, she said, but the goal is to be prepared before it happens, which is the benefit of using a financial planner.
When looking for a financial planner, it’s important that you’re comfortable with them. It’s about establishing trust, Pietrangelo said, noting that having a financial planner you can be honest with is like having a physical trainer — you don’t want to feel judged, but you want someone to nudge you in the right direction.
Ronda Lee is an associate editor for insurance at Personal Finance Insider covering life, auto, homeowners, and renters insurance for consumers. She is also a licensed attorney who practiced litigation and insurance defense.
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