From the Portsmouth Herald, January 6, 2011  

Money Talk: Retirement planning more challenging for women

Women are more highly educated than ever before and, as a result, have better employment prospects and higher earnings potential than their mothers did. When it comes to preparing for a secure retirement, this should be good news. Still, women face several significant challenges that can leave them under-prepared for life after work.

Women can expect to spend more years in retirement than men. Women live longer and tend to retire younger in order to coordinate their retirement date with an older spouse. Women also generally earn less than men and experience more career interruptions due to other demands like raising children. These factors detract from their ability to accumulate pension benefits which are based on earnings and job tenure. With longer retirements, women need more retirement income, but are not likely to get it from a pension.

Married women should also recognize that at some point they may be on their own in retirement, having outlived their spouse. This loss can increase a woman's risk of living in poverty in old age due to large final expenses and lost pension and Social Security income.

So what can women do to help secure their retirement?

The first step is universal — start saving early. New college graduates should consider employment offers carefully in terms of overall benefits, not just salary. Look for high matching contributions in a 401(k) plan and immediate vesting. If your 401(k) plan offers a Roth option, use it. The tax benefits of traditional IRA contributions are smaller when you are starting your career.

Second, choose the right investment mix for your retirement account. Surveys suggest that women tend to be more conservative investors that can reduce their long-term investment returns. A target-date fund or balanced fund can be a good choice for establishing a well-diversified portfolio.

When not working, married women should continue to save for retirement by making IRA contributions. A non-working spouse can make a full IRA contribution of $5,000 ($6,000 if age 50 or older) in 2011. As long as a couple's total income is less than $169,000, the contribution will be fully tax deductible, or the funds can go into a Roth IRA.

Give your retirement precedence over college. For moms, college savings is often chosen as their highest savings priority. Remember that you have many options for funding your child's education, but you cannot borrow for retirement.

If your spouse has a defined benefit pension plan, resist the temptation to take a lump-sum payment. Select a joint and survivor annuity that guarantees at least half of the pension continues to be paid after your spouse's death. This will mean a smaller monthly payment for both of you, but will provide valuable protection against outliving your assets.

Plan to be debt-free at retirement. Having your mortgage retired at the same time you do will provide considerable flexibility in your budget.

Understand what happens to Social Security benefits if you divorce or remarry. If your marriage ends before retirement, you are entitled to half of your ex-spouse's benefit if you were married for at least 10 years. Remarry and you cannot claim benefits on your ex's record. Your new husband's earnings will determine the amount of your spousal benefit. Widows are eligible for Social Security on their late husband's record as early as age 60 as long as they do not remarry before reaching that milestone.

Finally, married couples should make Social Security claiming decisions carefully. Social Security is the most secure income source for many retirees — it is guaranteed for life and has built-in inflation protection. For couples, it may be beneficial for the higher-earning spouse to postpone receiving benefits as long as possible in order to earn delayed retirement credits. These credits can increase monthly benefits by up to 32 percent over what would be received at full retirement age. Using a "file and suspend" approach in which the husband files for Social Security at full retirement age but waits until age 70 to start receiving payments can be a valuable way to ensure an adequate lifetime income stream for a future widow.