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How Women Can Get Retirement Back on Track

6 ways women with gaps in work history can catch up on their savings


MarketWatch

Editor's note: This article appeared previously on MarketWatch.com. It is part of a Next Avenue special section about women age 50+ managing their money.

When it comes to having enough money to retire, the statistics are staggering for boomer women who are single, divorced or widowed.

 
The lives of many women in this demographic have been laced with endless responsibilities that have deterred them from having enough resources to plan for their own retirement. For decades, they have been busy raising children, caring for aging parents and attending to family issues; all of which have interrupted career tracks and caused them to forfeit opportunities for their own financial gain. Thus, they now have a substantial shortfall of retirement savings.
Time to Take Charge 
 
If that sounds familiar, it's time to be proactive and become your own problemsolver regarding this financial dilemma. Women must prepare, as best they can, for their own retirement, regardless of their situation. So let's work from the place of “all things possible” and make this effort your No. 1 priority going forward.

(MORE: Women and Money Management: A Sad Story)

 
Here are six suggestions:
 
1. Consider Starting Without an Adviser
 
You may not need a financial adviser while you are pulling it all together. Generally speaking, you most likely can move through this stage of midlife investment accumulation on your own. Doing this yourself initially will save you fees and sales charges.
 
For now, your focus needs to be on the accumulation of as much money as possible for your retirement; every dollar will count as you are building your nest egg. Time, coupled with compound interest and dividends paid, is your friend in this very important personal project. Become familiar with one of the many online retirement calculators available to help you track your progress.
 
And if you don’t think you can do it, a recent article that ran on Next Avenue said this about women and investing: “Women tend to take more time to research investments, they’re more patient, they seek opinions from others in hopes of finding a consensus and they’re more likely to see investing as part of a long-term planning process to achieve a goal rather than as a contest or competition. They also may be less likely to bail out of stocks in times of stress.”

(MORE: How 'Opt Out' Women Can Opt Back In)

 
2. Take Advantage of 401(k) Plans
 
If you are working for a company that provides a 401(k) plan, sign up to participate for the maximum contribution. Company 401(k)s usually have a limited number of investment options and contributions will be limited, so having an additional investment structure outside the plan will serve you well as you work to accelerate the size of your retirement investment pool.
 
Once you retire, you can expand your investment options by rolling over your 401(k) plan money into an Individual Retirement Account and create a new asset allocation.
 
3. Open a Roth IRA
 
In addition to your 401(k) contributions, set up a Roth IRA. The contributions placed in your Roth IRA are after tax dollars and will grow tax free, and aren't subject to mandatory required minimum distributions at age 70 ½. Open your Roth IRA through one of the no-load mutual fund companies; it will charge a nominal fee, usually $20.00.
 
A good place to start your research for your investment options would be to check “Morningstar's Fantastic 48” for the status and ranking of what the investment analytical firm considers to be the top 48 mutual fund companies. This report will give you Morningstar's view of the best funds based on its research and evaluation of: risk analysis, expense ratio, manager tenure, the month and year the fund started, managers' annualized return, index return for the same period and any outperformance versus the index.

(MORE: Plan for Financial Independence)

 
Check the Roth IRA rules to be certain that you are meeting the federal government guidelines. Allowable contributions are based on your earnings and if you make a mistake and overfund your Roth IRA, you will be penalized. So be thorough in your research.
 
4. Delay Taking Social Security, If Possible
 
If you can, plan on retiring at age 70 when your Social Security benefit reaches its peak. The difference in the monthly benefit increase from Full Retirement Age (which is 66 or 67, depending on the year you were born) to age 70 can make a world of difference once you are retired. Here’s an interesting article written by MarketWatch RetireMentor, Jeffrey Miller, in support of waiting to collect Social Security at age 70.
 
In addition, The Center for Retirement Research at Boston College has an excellent resource tool designed to help you decide when to begin your Social Security benefit: The Social Security Claiming Guide.
 
Consider keeping your options open on a definitive retirement date. As time goes by and you continue to monitor your progress, you may find that you are able to retire earlier than originally anticipated.
 
Divorced women, be sure to check your particular profile with the Social Security Administration to see what additional benefit you may qualify for based on your ex-husband's income history and retirement status. For widows, inquire into your deceased spouse's past employers and military records, in addition to the Social Security Administration, for any survivor benefits or pension payouts you that you may have overlooked.
 
5. Micromanage Your Money
 
Don't think in terms of budgeting; think in terms of creating a nest egg for yourself. The benefits of being dedicated to building your own financial resources will serve you for many years. The end result of your efforts will come from the dollars you contribute, plus the time it takes for your investments to grow, along with compound interest and dividends paid.
 
Consider a paying hobby — something you find enjoyable that can bring in extra money for a few hours of your time per week. It could be a consulting project, tutoring on the weekend, whatever. Be creative. Then, use those extra earnings to build up your retirement emergency fund.
 
6. When It's Time, Get an Adviser
 
Once you have your accumulation plan in place and you can see your progress building year after year, then seek the help of a professional adviser. She or he will guide you through an evaluation of what you have created to see if your accumulated investments need to be restructured to deliver more lifetime income that will supplement your Social Security benefit and any pension benefits you'll receive.
 
Also, review the need for long-term care before you move into retirement.
 
You're On a Mission
 
Consider yourself on a mission: Be obsessed and single minded with creating your retirement money. Put yourself first, every single time. Ask for that raise. Keep your resumé current and one eye open for a better opportunity. Check your progress with your online calculator.
 
It will take a bit of time to see substantial results. But I promise you, once you begin to see your progress, you will be motivated to continue and you will eventually reach the promised land of having enough money to provide yourself with a comfortable retirement.
 

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