Four ways that women can build a retirement backup plan.
It's a sobering statistic: 64% of women have no back-up plan if they're forced to retire early, according to a Transamerica study1. An unexpected early retirement can create major challenges for women if they're not prepared.
To avoid this dilemma, here are four strategies to help:
1. Have your working spouse contribute to a spousal IRA.
The first strategy to consider: have your working spouse contribute to a spousal IRA during times when you're not working. As long as the working spouse has enough earned income, he or she can contribute up to $5,500 (if 49 or younger) and up to $6,500 if age 50 or older2.
2. Delay Social Security benefits.
While it's tempting to collect Social Security benefits early, waiting until you turn 70 means you'll collect your maximum benefit amount3. This strategy can boost your retirement income significantly. If you wait until age 70 to tap your Social Security benefits, you could increase your retirement earnings by about 32 percent over the normal retirement age of 66. Delaying your claim from age 62—the earliest age you can claim the benefit—to age 70 can boost the benefit's value by as much as 76 percent3.
3. Find work-from-home positions.
Another way to plan for an unexpected early retirement is to look for work-from-home positions to bolster your income and balance caregiving responsibilities. Women account for 60 percent of caregivers in the United States4, and working from home allows them to balance caregiving duties with a career without completely sacrificing an income and retirement savings. Not only does working from home offer scheduling flexibility, it ensures you continue investing your hard-earned income into a retirement account.
4. Work with a financial professional who gets you.
Finally, it's important to find a financial professional who understands your specific, long-term financial needs. Women tend to have a more conservative investing style than men and are less likely to focus on building wealth4. Working with a financial professional who works with you to prepare for retirement according to your unique situation, including your risk tolerance and time horizon, could help you formulate a plan in case you have to retire early.
The usual wisdom about retirement planning—participating in an employer's 401(k) plan, maximizing contributions as early as possible, and taking advantage of employer matching—are still vital to building wealth for retirement. However, these specific strategies can bring women stronger financial security if retirement arrives earlier than planned.
This material is provided for general informational purposes only. Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.
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