Women: Don't go broke in retirement

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Women, it's time to take charge of your retirement planning! That's the strong message we're getting from the third brief in the Society of Actuaries (SOA) research series, Managing Retirement Decisions.

According to the brief, women face special challenges when it comes to retirement planning:

-- They typically have lower Social Security, pension and 401(k) benefits than men because of intermittent work histories and lower salaries.

-- Their career and retirement years are sometimes interrupted by the need to provide care to parents or spouses.

-- On average, women live longer than men, and because men typically marry younger women, most women can expect a five- to 10-year period of widowhood at the end of their lives.

Once, when I made this last point at one of my retirement planning workshops about the five- to 10-year period of widowhood, one woman exclaimed delightedly, "Yes!" I told her she wouldn't be so happy if she ended up broke!

The SOA brief offers a some key steps women can take to help them take charge of their retirement planning:

1. Get your papers in order. You can't plan effectively if you don't know what your resources really are. The brief contains a helpful checklist of sources you should investigate that will aid you in compiling the correct information.

2. Figure out how much retirement will cost. Work with a financial planner or use an online calculator to estimate how much money you'll need to generate a stream of lifetime retirement income. Develop a strategy for paying for the cost of medical care in your retirement years.

3. Review the retirement plan. Determine how benefits will be paid to you (and your spouse or partner, if applicable) from defined benefit pension plans or defined contribution plans, such as a 401(k). Many people opt for lump sum payments from these plans. Instead, women might have better outcomes if they (and their husbands or partners) elect to receive a stream of lifetime retirement income. For married couples, often these plans require the wife's written consent to opt out of a joint and survivor annuity -- don't make this decision lightly.

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4. Analyze the best time to start Social Security. It generally pays to delay taking Social Security benefits in order to increase your retirement income. But women often have a complicated situation, facing three paths to benefits:

-- As a retired worker
-- As a spouse or survivor of an eligible worker
-- As a dually entitled beneficiary, where you receive the largest benefit from the two paths shown above

Social Security is a very important part of women's retirement security. Take the time to assess the course of action that provides you with the largest amount of lifetime income.

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5. Assess divorce and other special situations. Special planning is needed for the following situations:

-- Divorced women need to pay attention to their rights to retirement and Social Security benefits from their ex-husbands.

-- Women living with a partner don't usually have the same rights as married women, and generally need to make specific elections and plans in this situation to be sure they're getting all they deserve.

-- Women in second marriages should make sure beneficiary designations are current, and should be aware of how their current husband's benefits and assets may need to be shared with ex-wives and children.

-- Since many women will live into their 80s and 90s, they should develop a strategy to pay for long-term care, possibly including the purchase of long-term care insurance.

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The SOA brief provides details on all the above points and includes a list of useful resources that can help women learn more about the best ways to secure their retirement. Don't ignore this free help. Take the time now to protect your retirement later, and you'll truly be able to delightedly exclaim "Yes!" about your retirement years.

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    View all articles by Steve Vernon on CBS MoneyWatch»
    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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