Women and Retirement Planning
It’s Never Too Late

“A 65-year-old woman today must finance, on average, another two decades of life.”

David Cooper, Vice President
Washington Trust Bank
Wealth Management
& Advisory Services

A recent survey sited by the National Policy and Resource Center on Women and Aging found that close to 80 percent of women are anxious about financial security during their retirement years. Yet one in three didn’t know how much money she would need to ensure a comfortable retirement, and many others gave estimates that were far too low. A 65-year-old woman today must finance, on average, another two decades of life. The good news – it’s never too late to start planning!

How much will you need?

The best place to begin is to estimate just how much money you will need for secure retirement. Your financial requirements will depend on a variety of important considerations – primarily lifestyle and spending habits. Whether you are extravagant or frugal before retirement, chances are your spending habits will not change much.

A good rule of thumb is that you will need between 70 percent and 80 percent of your pre-retirement income. For example, if your pre-retirement income is $30,000, you will need at least $21,000 coming in each year from various sources. This is not a static figure. You will want to give yourself periodic pay raises to accommodate for inflation and increases in items such as property taxes.

The role of Social Security

So how do you replace earned income when you stop working? Social Security may take care of a portion. Say you paid into Social Security during your working years and earned an average annual salary of $30,000. If you decide to begin withdrawals at age 60, your estimated annual income would be approximately $11,448. Social Security benefits fluctuate based on the length of time you paid into the system, average income during your working years and retirement age. This estimate is based on current IRS and Social Security tables. The benefit calculator at www.ssa.gov can provide you with information that applies to your specific situation.

Minding your nest egg

Generating the remaining $10,000 will require a minimum nest egg of about $200,000. This could consist of an IRA, a personal investment account, a pension or an employee retirement plan.

Even though your $200,000 portfolio will likely generate more than the $10,000 in growth and income per year, it’s usually not a good idea to withdraw all the income your investments generate. A good rule of thumb is to take the year-end market value of your investments and multiply it by 5 percent. The resulting figure is what you should pay yourself for the coming year. By following these guidelines, your portfolio should continue to grow and you can give yourself an occasional pay raise.

Share the responsibility

It’s important for both partners in a relationship to take an active role in all money matters and review their situation often. You may find it beneficial to seek professional advice. A retirement expert can help you develop a plan and determine what investments are most appropriate based on your age, income needs and goals.

Whether your future plans include travel, volunteer work, a second career or simply spending time with family, a sound financial strategy ensures you’ll be able to enjoy the retirement of your dreams.

For more than 100 years, Washington Trust Bank’s Wealth Management & Advisory Services has provided the guidance and expertise to resolve complex money matters. We’d like to help you – contact David Cooper at 208-345-3343 or dcooper@watrust.com.

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