Many women have a "quiet fear" that they won't have enough money for retirement, but they can take several steps to make sure that doesn't happen.
"The key is to continue earning throughout retirement and to find ways to create income for life," says Donna Phelan, 62, who has worked with thousands of women nationwide during her 18 years with several large Wall Street investment firms. She has an MBA in finance and is the author of a new book, Women, Money & Prosperity: A Sister's Perspective on How to Retire Well.
Research shows that women often have far less saved for retirement than men, Phelan says. They frequently earn less than men and often take time out of their careers to rear children. They also spend more time with elder care. Some women don't start thinking about their retirement savings until late in life, and by then it's hard to save enough, she says.
So it's important for them to think outside the box and find alternative income strategies so they thrive during their golden years, Phelan says.
She encourages women to come up with what she has nicknamed SISTERS — Stackable Income Streams to Empower Retirement Security. The most important retirement-planning objective is to accumulate and "stack" as many diverse sources of retirement income as they possibly can, Phelan says. For example, if you have five different sources of income in retirement that each paid you $12,000 per year, it would add up to $60,000 annual income, she says.
Possible sources of income include pensions, Social Security, investments and savings, retirement plans such as 401(k) plans and IRAs, part-time jobs, inheritance, annuities, home-based or small business, rental property, life insurance and home equity.
She also encourages women to form SISTERS clubs and get together to talk with other women about financial issues and possibly pool their talents, ideas and resources to create small businesses. "My passion is to start a nationwide conversation about women and retirement."
Phelan says women should:
•Research their own retirement. Think about how much you'll need, what kind of lifestyle you want to have, where you want to live, what you want to do and where the money for this is going to come from.
•Delay their retirement start date. Make sure you have enough money to retire before you do. Talk to a financial adviser about the prospects of running out of money in retirement, given today's longevity predictions. Many women need to understand the necessity of earning an income at age 65 and beyond, she says. "Retirement can be like a camping adventure during an unexpected snowstorm. It can last much longer than you expect, and you must ensure that you have enough supplies."
•Work part time. "It keeps people vital and lively. It gives them a social network and gives them spending money," Phelan says. "It eases them into retirement because a lot of people don't prepare psychologically for retirement."
•Pool their assets with like-minded women to create business opportunities. "What do a marketer, artist and accountant have in common? They have the makings of an instant start-up if they were to pool their talents," she says.
•Create a home-based business. "I see so many women doing crafts and making jewelry, and they do it as a hobby or for charity, but they could easily monetize it," says Phelan, who had her own jewelry-design business with customers such as Tiffany & Co. and Cartier.
•Use non-traditional living tactics, such as renting out rooms of your home. Phelan says she knows one woman began renting empty bedrooms in her own home to local art students, and she used the income to make other financial investments that produced income.
•Get a roommate or downsize your home to a less expensive abode. "A house is often one of the largest expenses in retirement, but it can be a non-producing asset that is more than what women can afford to carry," she says.
Phelan says she has a roommate, and the arrangement has "allowed both of us to cut our living costs so we can save a little more in our 401(k)s."
•Become financially literate. Some women are intimidated by going to a financial adviser, but these professionals usually give a complimentary session to prospective clients to see if it's a good fit, she says. You also can learn about finances from books and websites.
•Look into optimizing your Social Security benefits. Make sure you've learned about all the options for taking Social Security, such as spousal benefits (ssa.gov), before you make a decision about your benefits. Unless you are in ill health or in dire need of money, delay taking Social Security for as long as possible. Every year you wait increases your Social Security benefit by 8% up to age 70, she says.
• Pay off unproductive debt, such as credit card debt, as quickly as possible. If possible, pay your credit card bills in full every month. If you cannot, then always pay more than the minimum.
•Rework your budget and spending plan; eliminate non-essential spending.
The sooner women get started doing all of this, the better off they are going to be, Phelan says. "Women need to recognize the role they play in their own retirement-planning process and take responsibility now for their retirement prosperity."
