Retirement planning is hard, but it can be even harder for women

Retirement literacy is abysmally low in the U.S. Only 35 percent of men -- and an even worse percentage of women (17 percent) -- age 60 and over passed a basic quiz on how to make their savings last the rest of their lives, according to a recent study conducted by The American College.

The survey results provide even more evidence of a fundamental disconnect that older Americans have about retirement planning. Despite their low retirement literacy, more than half of all women (55 percent) are still extremely confident that they and their spouses would have enough money to retire comfortably. 

Go figure.

Apparently, they think "Somehow things will work out OK (because I'd rather do anything else than plan for my retirement)." If this sounds like you, it's time to pull your head out of the sand and take a retirement reality check

If you're a woman in your late 50s or early 60s, you could easily live for two to three more decades -- possibly one-third of your total lifespan. It only makes sense that you'd want to spend more time planning for the rest of your life than you do planning your next vacation.

What can you do? First, take The American College's retirement literacy quiz. It should take only about 30 minutes, and it's a good learning experience. As you take the quiz, you'll see the right answer to each question.

The next step is to take inventory of your financial resources and understand your options. The Society of Actuaries (SOA) recently released an excellent brief titled "Women Take the Wheel: Destination Retirement." It's part of their series Managing Retirement Briefs.

The SOA brief summarizes the important decisions women should make regarding retirement, provides a checklist of documents to collect, discusses how to collect pension and 401(k) benefits, alerts readers to the problem of long-term care and discusses special situations, such as how benefits are treated in a divorce. 

While you're on the SOA page, be sure to check out other briefs that will help you learn more about various retirement planning decisions.

The basic problem for women is that they'll most likely live longer than men, yet they often have fewer retirement resources, such as 401(k) accounts, IRAs or pensions. The solutions to address inadequate retirement resources (for men as well) are fairly straightforward, albeit easier said than done: Work longer, save more, spend less, take care of your health and nurture your social network.

Still, women face at least three general life circumstances that can call for different solutions. 

First, women who enter retirement as part of a married couple will want to make wise choices jointly with their spouse, with the intent that their retirement income would last as long as either spouse is alive. Here's an overview of the most important and effective actions to take:

  • Delay the start of Social Security benefits as long as possible for the primary wage-earner but no later than age 70. Use popular online retirement planning software to determine the best claiming strategy for the other spouse.
  • If either spouse has earned significant pension benefits, elect the joint and survivor annuity that will be paid as long as either spouse is alive. Resist the temptation to decline the monthly check and take one lump sum payment that might not last for life.
  • Prepare a thoughtful strategy to deploy retirement savings to generate retirement income, so that it lasts as long as either spouse is alive. Don't "wing it" and use your retirement savings like a checkbook to pay for living expenses.
  • Develop a strategy to address the threat of long-term care expenses. Often, it's the wife who becomes the caretaker for her husband. In this situation, retirement savings can be drained quickly, and the wife can be left poor and emotionally exhausted.

Second, working women who have remained single are on their own, so they'll need to develop strategies to ensure they have income that lasts the rest of their lives. That often means delaying Social Security benefits as long as possible and deploying retirement savings to generate lifetime income. They'll also want to nurture their social network, not only to enjoy life but also to have people who can help during tough times.

Third, women who divorce in midlife are vulnerable, particularly if they worked only in the home, often to raise the children. They'll want to:

  • Understand how to claim pension and Social Security benefits from their ex-husbands.
  • Find paid work and continue at it as long as possible to build up their own Social Security and retirement savings, and then learn how to deploy their savings to generate retirement income.
  • Look for ways to significantly reduce their living expenses -- the "Golden Girls" solution of living with friends or relatives might be particularly effective and helps address loneliness.

These decisions and life steps can be a tall order for anyone -- woman or man -- but it's what you'll need to do. Nobody said living a long time would be easy. So give yourself a fighting chance by learning as much as you can now and implementing some smart strategies.

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    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.