When to Retire

Money Made by Women –

Planning for Retirement – Women Face Unique Challenges

Men and women may have been created equal. However, when it comes to retirement security, women typically find themselves at a disadvantage. In planning for retirement, women face a variety of unique challenges and obstacles:

Women earn less money over their lifetime. On average, a woman earns 80 percent of what a man earns in the same job¹. Women are also more likely to leave the workforce to care for young children or aging parents, and will work an average of 12 years less than men over their lifetimes due to caregiving responsibilities². With less income, women already have less money to invest, but in leaving the work force, they also have less time to contribute to employer-sponsored retirement plans or benefit from the employee match provided by many of those plans.
Women live longer. More than two-thirds of Americans age 85 or older are women, and more than three quarters of all American women age 65 are expected to live to age 80; approximately 40 percent of them will live to age 90³. Greater longevity means that women have to plan for living expenses, and the impact of inflation, and the potentiality of increased medical expenses.
Women are conservative investors. According to a July 2009 research study by Hewitt Associates, women are less aggressive than men when investing in their 401(k) plans. Women also save 8 percent less money in 401(k) plans than men⁴. This means that woman, if they invest conservatively over their lifetimes, will likely receive a lower rate of return on their retirement dollars.
Women will likely face retirement alone. Roughly 40 percent of marriages end in divorce⁵, and nearly 60 percent of older American women are single, including more than 42 percent who are widowed⁶. When widowed, some benefit payments may be reduced. As an example, if you become a widow, you will probably receive less Social Security. Generally, both spouses receive a Social Security benefit as a married couple, but the surviving widow will receive only the larger benefit payment. Pension benefits may also be reduced, often by half, or payments may stop entirely.

Addressing Women’s Unique Retirement Needs

To address these issues, many women may need to consider saving more, investing less conservatively if appropriate and, perhaps, working a little longer. There are several steps women can take to build a roadmap to a more independent retirement future.

Take control of your finances now. Since women are likely to live alone in retirement, get involved with your family finances early. Save or invest in your own name. Become comfortable making personal monetary and investment decisions. Establish credit in your own name. Balance the family checkbook, write the checks and pay the bills yourself. Know what your family owns and owes.

Plan ahead. To improve your retirement future, you have to know where you’re going. Your retirement plan should begin with the basics – net worth, income and expenses. Determine when you want to retire, how much you will need to live in retirement, how much time your investments have to grow, and how much you can afford to save. Analyzing these factors will help you determine how long your assets could potentially last at various rates of return, inflation and spending.

Save and Invest. Defined contribution plans, such as 401(k) plans, offer you a way to defer compensation for your retirement. Save as much as you can in the plan, ideally at least as much as your employer is willing to match. The maximum deferral contribution for 401(k) plans is $16,500 for 2009.

If you are over 50 and can afford to, you can make a catch-up contribution of an additional $5,500 before tax. Individual Retirement Accounts are another option which will allow you to put away $5,000, pre-tax in 2009, and if you are 50 or older, you can put away up to $6,000 this year, paying taxes only when the money is withdrawn.

If your financial professional deems it appropriate, consider investing in an annuity. Annuities are insurance products that can help provide income during retirement. You purchase an annuity by investing a sum of money, either all at once or over a period of time. In return, the insurance company agrees to provide you with a steady income beginning at an established date in the future and usually until the time of your death. For more information about annuities, please visit AXA Equitable’s Learning Center.

Diversify. Some women may possibly need to be less conservative in their investing to help increase their retirement savings. When deciding what investment options to consider with the help of your financial professional, be sure to first assess your risk tolerance. If you have a higher risk tolerance and are starting to invest when you are younger, consider an investing strategy that is fairly aggressive. This gives you the opportunity for greater gains, but also has the potential for greater losses. As you get older and if your risk tolerance changes, you can switch to more conservative options as retirement draws near. Whatever your time horizon or risk tolerance, diversification should be considered throughout the entire investing process. A diversified asset allocation can help you manage risk. It does not, however, assure a profit or provide against loss in declining markets.

Consider working longer. If you’re near retirement, rethink when you retire. Delaying retirement may help you save more to offset market losses. For someone who has been looking forward to retirement, it may not be what you planned on, but working longer, even just another year or two, is probably the best way to accumulate additional retirement savings. This will also allow you to hold off on retirement account withdrawals. The longer you can let retirement accounts accumulate and, hopefully, grow, the better off you’ll be. You will, however, need to begin taking distributions eventually. The law specifies that you generally must begin taking Required Minimum Distributions (RMD) as of April 1 of the year after you reach age 70 1/2. You will likely need the help of your tax advisor to determine the exact amount of these required distributions, which are based on your life expectancy and, in some cases, those of your beneficiaries.

Enlist the help of a financial professional. A financial professional can help you assess your current situation, identify your goals, risk tolerance, income sources and work with you to develop a personalized retirement strategy. Our research shows that women who use financial professionals are more focused on their financial situations and retirement. According to the 2009 AXA Equitable Market Volatility survey, more than seven in ten (71%) women with financial professionals considered preserving assets for retirement significantly more important following market volatility, compared to just 60 percent of women without financial professionals⁷.

When it comes to saving for retirement, time is of the essence. The longer your investment horizon, the more time your money has to work for you. Contact your financial professional today to arrange a meeting to assess your situation. Planning and preparation can help women overcome obstacles for a financially healthy retirement.

For more information on retirement planning tips and strategies, visit the “At Retirement” section of the AXA Equitable Learning Center.

Useful Resources & Links:

1) U.S. Bureau of Labor, Highlights of Women’s Earnings in 2008, 2009
2) Americans For Secure Retirement, “The Female Factor 2008.”
3) Society of Actuaries Annuity 2000 Tables
4) National Center for Policy Analysis; Women in the Economy, July 2008.
5) CDC Fast Stats, Divorce www.cdc.gov/nchs/fastats/divorce, 2004
6) U.S. Bureau of the Census, “A Profile of Older Americans: 2008”
7) AXA Equitable 2009 online survey among 1,116 randomly chosen U.S. consumers who were 25 to 70 years old, and with household incomes of $50,000 or higher and must have a primary or shared role in their household financial decision-making. Of these, 368 were women.

For informational purposes only. This is not investment advice. Investments are subject to market risk, will fluctuate and may lose value.

AXA Equitable Life Insurance Company (AXA Equitable) (NY, NY)

Securities are offered through AXA Advisors, LLC, member FINRA, and SIPC. AXA Advisors, AXA Network and AXA Equitable are its affiliates.

Investments are subject to market risk, will fluctuate and may lose value.

Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor. AXA Equitable Life Insurance Company (New York, NY) and its affiliates do not provide tax or legal advice.

Securities are offered through an affiliate, AXA Advisors, LLC, member FINRA and SIPC.

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