Mothers are often envisioning what their children’s futures may look like – but they shouldn’t forget to plan for their own, especially when it involves finances and retirement.
Retirement Tip of the Week: This Mother’s Day, treat yourself to some retirement planning, taking into consideration how much you’ve already saved, how much more you might need to invest based on your goals, and what you want out of retirement. If you aren’t a mother yourself, consider giving this gift of an idea to someone close to you.
Women and men don’t always approach retirement savings the same way. They may invest differently, with women being more conservative than their male counterparts, or they may not be able to save as much for their futures because of lower earnings, as evidenced by the gender wage gap. Women also tend to have longer life expectancies, which means their savings must be stretched over time, and they are also more likely to act as caregivers for their children and sick loved ones. The time away from the workforce could be detrimental to their nest eggs and their future Social Security benefits.
Some of these circumstances may be unavoidable, at least in the short term, but planning can still help.
In terms of caregiving, women should discuss the logistics of this service with their family members – such as a partner in the case of raising a child, or siblings, aunts or uncles when it involves an elderly parent. Many caregivers said even without pay, they’d do their jobs all over again to help their loved ones, but mapping out a structure for care could benefit the individuals acting as caregivers as well as those receiving the care. There may also be benefits available to family caregivers, such as being paid for their time.
These logistics should include the actual hours that will be put in (and how that might impact their work schedules), the expectations for caregiving (such as physical and financial responsibilities) as well as how to pay for this care without the onus falling entirely on one person. If possible, people should discuss with the relatives who need – or will need – the care exactly what they hope for when the time comes. The earlier these conversations are had, the easier the situation may be when assistance is needed.
As far as childcare, if one parent leaves the workforce, both parents should discuss a savings plan that will benefit both people in old age. When one person leaves the workforce, he or she is no longer able to benefit from an employer-sponsored retirement account. Spouses can contribute to an IRA on behalf of a non-working spouse though. Later on, married couples should also talk through how they’ll claim Social Security benefits. This includes if they’ll draw on benefits sooner rather than later, and what the consequences for the spouse with lower historical earnings would be, as well as how they can coordinate their claiming to max out their benefits in a way that aligns with their current cash flow needs.
Aside from talking out plans for retirement, women should arm themselves with as much financial advice and education as they can. This could come in the form of working with a financial adviser, or being active in conversations with the family’s financial adviser if they already have one. For those who are not interested in working with a financial professional, there are plenty of books and online resources to calculate the likelihood of their savings lasting them the rest of their lifetime, as well as how to rebalance or manage an investment portfolio, budgeting and when to claim Social Security benefits.
MarketWatch teamed up with NewRetirement to create retirement savings calculators to help readers make sense of their finances.
Women should also think carefully about their own caregiving needs, discuss these ideas with family members, save extra for the medical costs they might incur in their old age and weigh the options of insurance and long-term care products that could benefit them.