By Wendy Mihm | February 19, 2011

Do women need their own retirement strategy?

Maybe.

Let’s look at some facts.  On average, women live longer than men, and women tend to think and communicate about money differently than men do.

Health Care Expenses Eat Away at Retirement Savings

One of the largest expense categories most retirees face is health care.  Many people think that, once they hit the age of 65, Medicare will cover their health care costs, but this is simply not the case, especially if brand name prescription drugs are in the picture.  Medicare does cover some expenses, but it leaves many gaps in coverage.  That’s why there is a whole sub-segment of the health insurance industry that sells senior supplemental plans like “Blue Cross “Medigap” plans —to fill in the gaps left by Medicare.

According to Gail Marksjarvis, a finance contributor with the Chicago Tribune, a man retiring today at age 65 would need in the range of $134,000 to $378,000 in savings, just to cover health care expenses.

Yikes.

Now let’s extrapolate that out to a woman retiring today – who will presumably live about 5 years longer than the average man we just talked about.  That would be about $164,000 to $450,000.  Just for health care.

Gulp.

Now imagine the amount of savings you’ll need if you also want to be able to afford other ordinary living expenses, such as housing (even though your mortgage may be paid off by then, you’ll still need to pay for things like taxes, maintenance and homeowners insurance), meals, car expenses, travel and leisure costs, and all those other expenses that add up to make life enjoyable.

Women Tend To Think About Money Differently Than Men Do

Now that I’ve scared the bejeezus out of you, what should you do about it?  Well, let’s look at that next point from above:  women often tend to think and communicate about money differently than men do. 

I met a woman at a conference recently who is a financial adviser, and she told me about how women always seem relieved to come to her office to talk to another woman about money. 

“They don’t want to out-compete anyone with their money.  They don’t care about out-performing the broker down the block or even the S&P 500, for that matter.  They come to me with very straightforward goals” she says.  “They’ll tell me something like ‘I want to send my daughters to college… if they get into really good schools I don’t want to have to say no’ or ‘’My husband and I want to move our family into a bigger house in a neighborhood with great schools.  How can we do that?’”

I can relate to that so well it’s almost scary, and maybe you can too. 

So this is what I would advise you to do: think and communicate about money like you naturally would: in terms of a straightforward goal.  Forget about statistics.  Forget about stock tickers. Don’t panic.  Get informed about how much you need.  Visit our article called How Much Will I Need to Retire?  and play around with the calculator in the link. Talk with your spouse.  Max out your 401ks together.  Visit our other article called Get Started Investing for more ideas there.

Then set a straightforward goal by putting a number in your head—or even better, put it down in writing—and go after it! 

It doesn’t matter if it’s not the perfect number.  There is no perfect number!  What matters is that you and your partner start going after a retirement goal and that you get started right away. 

Use the way you naturally think and communicate about money as a woman to tailor your retirement strategy and you just might retire richer.

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By Wendy Mihm | February 7, 2011

It’s 2011 – do you know how much you’ll need to retire?

If you’re like many Americans you feel a bit clueless in this arena.  Well, instead of feeling clueless, why not take five minutes, right now, to run some numbers.  That way, if you’re off track, you can make a plan to address the problem, or if you’re on track, you can relax and enjoy the ride. 

I found an easy-to-use calculator at T Rowe Price and put the link in right there so you can just click, plug, and chug.  In fact, I just did it and it was actually kind of fun, in a geeky sort of way.

Now remember, this is just a fun little calculator, and it is not meant to take the place of a thoughtful review and discussion with your spouse, about your retirement goals and strategy.  But it can help you see how much money you will have in retirement, based on how much you have invested to date. 

And it just might give you a needed kick in the pants to get moving, if the calculator identifies a major shortfall— or a reason to feel great if you’re already on track for a healthy, happy financial retirement.

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By Wendy Mihm | Monday November 29, 2010

This article has one purpose:  to motive you to get started investing now.

Maybe your house is a mess – yesterday’s apple juice is still vaguely sticky on the kitchen counter and there are Legos stuck in Play-Doh on the windowsill.  Maybe you are busy negotiating with your kids to do their homework and your husband to roll that giant bin of recyclables to the curb. Retirement seems a million light-years away. But you owe it to yourself to invest in retirement savings, because those quiet years are creeping up on you, one loud, crazy day at a time.  And one day, sooner than you think, the door will bang shut behind your youngest child and the house will be strangely quiet.

Then you will have all the time in the world to figure out how to set money aside into a tax-free shelter, but by then it will be too late because that money won’t have sufficient time to grow.

Listen to the very different stories of these two couples (names have been changed to protect the regretful and the smug).

Couple #1:  Allen and Nisha, 57 year old parents of 3 grown girls.

Allen:  “I was always torn about how to invest for our retirement.  It just seemed like we needed as much money as we could get for the things we wanted to do…”

Nisha:  “I really wanted the girls to go to fun camps and things, you know?  To have beautiful dresses.”

Allen:  “But we still put money into my company’s 401k.  We put in 5%.  Not enough to earn the company’s match, but we though it would be good enough over time to help us retire.”

Nisha  “I guess I thought that because he was putting money in, we would be fine, with that and social security, but now we have just over $260,000.  Not really enough to last very long.  Our house is not paid off yet and we are both pretty healthy and expect to live well into our 90s.  I’m not sure what we are going to do…”

Allen:  “Work longer, I guess.”

Couple #2:  Alicia and Mario, 60 year old parents of two grown boys and one girl in college.

Alicia:  “I pushed hard for it because my Dad had taught me all my life to max out my 401k.  So I maxed mine out for all the years I worked.  Then I coaxed Mario to max his out, which he eventually did.”

Mario: “I really wanted to rely on my pension and did not like the idea of maxing out the 401k because it came out of my paycheck!  But I am so glad I did because our company eventually eliminated pensions before I ever got mine.”

Alicia: “He’s been maxed out and earning the added company match of 2.5% for over 15 years.”

Mario (smiling and squeezing Alicia’s hand):  “We have over $780,000 saved up for our retirement!”

Alicia: “And because it was done automatically, we never felt like we were depriving ourselves of anything.”

Mario: “I’m taking her to Paris!”

Which of these couples would you rather be?

Clearly, the one with more money.  So what should you do?  Get started investing now.

How? 

Well, the easiest and first thing to do is to make sure that you and your spouse are contributing enough to your respective employer’s 401k plan to earn the company match.  To contribute less than that is just not too bright.  Why? Because you are turning down free money from your employer.  Let me say it again.  You are turning down free money from your employer.  You’re smarter than that.  Go get your free money. Now.

Ok, already done that and want to do more?  Good for you! 

Research shows that the next place to go after earning your employer’s 401k match is the Roth IRA if you qualify, so that just might be worth considering.  The big deal about the Roth IRA over the conventional IRA is that when you take your money out to spend it during your retirement years, you will not be taxed on those withdrawals.  Ever.  The catch is, not everyone can take advantage of a Roth IRA – they’re only for use by people under a certain income bracket.

The table below outlines the Roth IRA income limits so you might want to check that out to see if you qualify.

If you hate tables, here’s what it said:  if you’re single or filing separately, you can participate at some level in a Roth IRA if your gross income on your tax return is less than $120,000.  If you’re married and you file a joint tax return, you and your spouse can put money into a Roth if your gross income is $177,000 or less.

The next thing you’ll need to know about is contribution limits if you decide to go the Roth IRA route (and if you qualify), but I don’t want to lose focus on the main point of getting started investing, so we’ll save that topic for another article.  What you need to do is to get started investing in something—whether it’s a Roth IRA, your employer’s 401K match program or something else—just get started.

And if you are already earning both your employer’s 401k match and contributing to a Roth IRA or traditional, big congrats to you, because you, my friend, are well on your way to living a healthy, happy financial life. Woot!

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