Women: You Need an Individual Retirement Plan

You deserve to live a lifestyle that brings you joy - even if you outlive your partner. Creating an individual retirement plan is one way to safeguard yourself against financial scarcity during your years as a retiree, and help to prepare you for the possibility of facing retirement without your life partner by your side.

Recent studies have shown that women often have up to 42% less retirement income than men due to a variety of factors including taking time off to be a caregiver, and the gender wage gap. This highlights the importance for women to be persistent when it comes to getting involved with their family’s retirement planning process, and in creating their own individual retirement plan to protect themselves and ensure a lifetime of financial security.

Combined Finances Doesn’t Always Mean a Combined Retirement Plan

It can be daunting to create a retirement plan that addresses your individual needs as a pre-retiree, especially if you’re accustomed to mapping out your finances together with your partner. Although some elements of your retirement plan may be combined, like making sure you have the appropriate life insurance in place to protect one another and your other dependents, or setting up a comprehensive estate plan, you need to have your own individual retirement savings as a woman.

Relying solely on your partner’s retirement savings, either through their employer or additional savings vehicles, may put you in a nerve-wracking position if you should outlive your partner. In a perfect world, any funds they’d saved would go directly to you, their beneficiary. However, this process isn’t always perfect, and you wouldn’t want to be stuck waiting on funds that may take a significant amount of time to move over to your name - especially if they get stuck in probate.

What Should You Do?

One step to take is to ensure that both of your names are on all of your retirement accounts, either as owners or beneficiaries. However, it’s an even better idea to speak with a financial planner about what additional steps you should take to plan for longevity, and to financially prepare yourself in the event that you outlive your partner. A financial planner can help you to facilitate conversations with a partner or spouse about your financial plan, and how to structure it in a way where you both are able to live the life you’ve always imagined for yourself as retirees - together or apart.

Getting Involved and Protecting Your Interests

The good news is that preparing for your individual retirement needs isn’t as hard as it sounds, even if you are a full time caregiver for kids or parents who have moved back in with you and your partner, have recently gone through a divorce, or are self-employed. For example, if you’re a full time stay at home parent or caregiver, looking into a Spousal IRA where your employed spouse can contribute to an IRA in your name while you stay home could be an option. If you’re self-employed, looking into a Roth or Traditional IRA, or a SEP-IRA can help make it possible for you to contribute to a retirement account even if you don’t have access to a traditional corporate 401(k). If your spouse is a business owner, you may be able to have a retirement account with the company if you take a role in managing the business.  Any savings account can be geared toward retirement, although the tax-deferred accounts may be preferable.

Having your own retirement funds are critical as you near retirement age to help ensure a successful, fulfilling, and financially stable retirement. However, it’s also important to have your own individual retirement funds to protect yourself against the financial fallout often associated with divorce, separation, or losing a spouse who hadn’t named you as the beneficiary on their accounts. (And you should check the last item to be sure!) Although you and your spouse may be currently saving toward retirement together using their retirement account, that doesn’t mean you have any claim over those funds should things take a turn for the worst.

You deserve to protect yourself against financial instability, and any future money-related stress. Setting up your own retirement plan that’s separate from your spouse or partner’s can help. Additionally, speaking with a financial planner who can help both you and your spouse build a retirement plan that protects you as individuals and maximizes your financial interests as a couple may be in your best interest. Want to learn more? Contact us today to discuss your retirement goals, and how we can build a plan together that helps you achieve them.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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