Batesville Herald Tribune, Batesville, Indiana

Business

June 3, 2014

Women, longevity risk and retirement saving

Will you live to be 100? If you’re a woman, your odds of becoming a centenarian are seemingly better than those of men. In the 2010 U.S. Census, over 80 percent of Americans aged 100 or older were women.

Will you eventually live alone? According to the Administration on Aging (a division of the federal government’s Department of Health & Human Services), about 47 percent of women aged 75 or older lived alone in 2010. If that prospect seems troubling, there is another statistic that also may be. While 6.7 percent of men age 65 and older lived in poverty in 2010, 10.7 percent of women in that age demographic did.

Statistics like these carry a message. Women need to pay themselves first. A phrase has emerged to describe all this: longevity risk. As so many women outlive their spouses by several years or more, a woman may need several years more worth of retirement income. So there is a need to consider income sources – and investment strategies – for the years after a spouse passes away.

What does this mean for the here and now? It means contributing as much as your budget allows to your retirement accounts. Procrastination is your enemy and compound interest is your friend. It means accepting some investment risk. Growth investing for the long run is looking more and more like a necessity.

You will need steady income, and you will need to keep growing your savings. In 2012, Social Security income represented 50.4 percent of the average annual income for unmarried and widowed women 65 and older. Having a monthly check is certainly comforting, but that check may not be as large as you would like. The average woman 65 or older received just $12,520 in Social Security benefits in 2012.

You will likely need multiple streams of income in retirement, and fortunately forms of investment, housing decisions and inherited assets can potentially lead to additional income sources. A chat with a financial professional may help you determine which options are sensible to pursue.

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