THE IMPACT OF RUNNING
OUT OF MONEY: A LOOK
AT RETIREMENT RISKS
FOR WOMEN
n4a Annual Conference
July 26, 2016
Cindy Hounsell, President, WISER
Maureen Kelly, Thanks Mom and Dad Fund
(formerly at Atlanta Regional Commission – AAA)
WHAT WE’LL COVER TODAY:
 Introduction
& Setting the Stage:
Maureen Kelly, Thanks Mom & Dad Fund
formerly at Atlanta Regional Commission –
Area Agency on Aging
 Impact
of Running Out of Money:
Cindy Hounsell, WISER & National Resource
Center on Women & Retirement Planning
2
NATIONAL EDUCATION AND RESOURCE
CENTER ON WOMEN AND RETIREMENT
PLANNING
 WISER
operates in partnership with the
Administration on Aging
 Gateway to basic retirement information and
resources
 Focus is on retirement readiness, health and
long-term planning
 Provide tools and information (fact sheets,
booklets, worksheets, etc.) on key retirement
planning topics

Visit the Center at www.wiserwomen.org
3
WHY WOMEN?
 At
age 65+, there are 6 million more women
than men
 At 70, there are 5.2 million more
 At 85+, there are 1.9 million more: 71% of
the 85 and older population
 The age 85+ numbers are expected to
double/triple over the next three decades
 This is the most likely group to end up living
in poverty
4
SETTING THE STAGE
 Longer
Life expectancy: At age 65, 3 out of
10 women will live to age 90
 Married
couples need to plan for survivor’s
needs
earn less than men – annually and
over a lifetime
 Women
 Women’s
median retirement income is 60%
of men’s
5
SETTING THE STAGE
CONTINUED…
are the primary family caregiver –
resulting in shorter work histories by an
average of 12 years
 Women
have lower employer – provided
retirement benefits and lower Social Security
benefits
 Women
 Divorce
and widowhood have a more
negative impact on women
6
Key Findings
•
Two in five women (39%) compared to one in five men (20%)
expect to live to age 90+.
•
Seven of ten women (71% vs. 63% of men) report being either
very or somewhat concerned about providing for their own or
their spouse’s long-term care needs and are nearly twice as
likely as men to be very concerned (27% vs. 15%).
•
More than half of both women and men (53%,) respond to
unexpected financial emergencies by dealing with them “if
and when they happen” as opposed to planning for possible
scenarios and contingencies.
•
More men than women (34% vs. 28%) report getting serious
about retirement income and expense decisions/calculations
in their 20s and 30s. One in three men (32%) and over one in
four women (28%) did not get serious until their 50s and 60s.
Source: MetLife Study of Women, Retirement and the Extra Long Life,
Mature Market Institute and Scripps Gerontology Center, September, 2011
7
ISSUES UNIQUE TO WOMEN
8
FINANCIAL RISKS OF LONGEVITY
9
WOMEN NEED MORE RETIREMENT
INCOME
 Women
live longer.
 Women are more likely to need
long-term institutional care.
 Women are more likely than men to be single and not
remarry.
 1 out of 4 women age 65 and over, who are alone, live
below the poverty level.
 Because of the need for income, women are more
likely to keep earning during retirement years.
10
FIVE MONEY MISTAKES
WOMEN MAKE
 Not
getting involved in family finances
 If married, using only your money for
everyday expenses
 Trying to pay for half of everything when
you really can’t afford it
 Not seeking help or information soon enough
 Not realizing you may live on your own
some day
11
WOMEN NEED TO BECOME BETTER
PLANNERS
 Know
their income sources.
 Understand why they need their “number”: AARP
has a great interactive Social Security calculator.
 Two financial company calculators we likeT. Rowe Price and Transamerica. (No cost)
 Women should use caution and plan to replace
more of their pre-retirement income – some say
80% but Hewitt says 130%.
12
WORKING WOMEN’S INCOME
CHALLENGES
 The
wage gap
 Median income (half make more, half make
less)
Women:
Men:

$39,621
$50,383
13
OLDER WOMEN’S INCOME
CHALLENGES
Average
annual Social Security
benefit
 Men:
 Women:
$18,000
$14,000
14
OLDER WOMEN’S INCOME
CHALLENGES
 Poverty


Men: 7%
Women: 12%
 Likely


65+
to be single 65+
Men: 19%
Women: 35%
15
OLDER WOMEN AND POVERTY
 Older
women are more likely than older men
to be poor.
 Around 1 in 10 older women are poor.
 Almost 1 in 5 unmarried older women live in
poverty. (2 out of 3 by age 80)
 24 % of women age 65+ rely on Social
Security for 90 percent or more of their
income
 The likelihood of a woman being poor in
retirement increases with age.
16
RETIREMENT NEEDS &
SOURCES OF INCOME
Retirement
Needs:
 Income
 Medical
and prescription drug coverage
 Long term care
17
SOURCES OF INCOME IN
RETIREMENT
 3-Legged





Stool
Social Security
Pension
Savings & investments
Work
SSI - Supplemental
18
IMPACT OF WOMEN’S UNIQUE
CHALLENGES
3 out of 5 women over 65 have
incomes that don’t cover their basic
daily needs
19
IMPACT OF
WIDOWHOOD
20
FOR MOST MARRIED WOMEN,
WIDOWHOOD IS INEVITABLE
 Women
are 4X more likely than men to
outlive their spouses
 85% of women over the age of 85 are
widows
 Many women spend 15+ years as widows
 Yet, if couples do financial planning, they’ve
usually planned for their years as a couple
21
WHAT IS THE FINANCIAL IMPACT
OF WIDOWHOOD?
 Decline




in standard of living is likely
Household income generally declines by
about 40% due to changes in Social Security
benefits, spouse’s retirement income, earnings
Household income declines by one-third if a
couples SS benefits are based on 1 person’s
work history and up to 50% if based on both
One study found that 1 in 8 needed to move to
less expensive housing
22
WHAT IS THE FINANCIAL IMPACT
OF WIDOWHOOD?
 From



39% of widows said financial concerns made
deal with loss harder
32% of widows said they had less financial
security in first year after spouse died
About a third could no longer save for
retirement or contribute to a child’s college
fund
 From

New York Life survey:
a WISER survey:
37% had difficulty determining what they
were entitled to receive from Social Security
23
HOW TO BE PREPARED -- PLAN
 Your
spouse should ask the question “If I
wasn’t around, what would you struggle
with?”
 Consider an “After I’m Gone” file
24
HOW TO BE PREPARED -- PLAN
 Partner
with your partner now to make
financial planning and investment decisions

From where are important documents and what are
passwords to decisions about life insurance, long-term
care insurance, investments, wills

Consider women’s longer life expectancy and plan for
survivor’s needs – only in 50% of married couples
age 65 do both partners reach age 80

Realize you will be the sole decision maker at some
point – have a relationship with the family financial
advisor
25
UNDERSTAND BOTH PARTNER’S
RETIREMENT PLANS
 For
a defined benefit plan, consider optional forms
of benefit – if married, participant must choose a
50% joint and survivor benefit which continues half
of the benefit to the spouse upon death



Spouse must sign if another option like a lump sum is
chosen
Is a 100% J&S option more appropriate where the income
does not drop when the participant dies?
Make sure you know who to contact and what you are
entitled to from employer plans – life insurance? Other
death benefits?
 If
participant is ill but has not yet retired, consider
whether retirement should occur as often more
choices are available
26
SOCIAL SECURITY DECISIONS
 Widows
depend on Social Security for a
larger percentage of their total income

For 20 % of women over 80, Social Security
is their sole source of income
 If
you are over age 60 and have been married
for at least 9 months, you can receive
between 71% and 100% of your husband’s
Social Security Benefit

But – if you are collecting on your own
earnings, you may receive no additional
benefit
27
SOCIAL SECURITY DECISIONS
delaying claiming – for you and or
your spouse as the increase in the benefit
from delaying will provide a larger widow’s
benefit
 Consider
28
IMPACT OF
DIVORCE
29
DIVORCE
a difficult time it’s important to be
practical.
 During
 Take
the time to find out what your rights are
to your spouse’s pension.

Every state has a different rule.
30
PENSION BASICS – DIVORCE
 Under
all state laws, a pension earned during
marriage is a joint asset. It is NOT automatically
divided.
 You
must specifically ask for a share of the
pension at the time of your divorce.
 You
need to get a separate court order stating
your right to a portion of your ex’s pension — a
“qualified domestic relations order” or QDRO.
31
PENSION BASICS – DIVORCE
CONTINUED…
Remember—
 Check
to see if spouse has more than one
pension from a current job or previous jobs.
 Find out how much spouse has earned in pension
benefits under each plan.
 You may want to have the benefits valued by a
pension actuary or accountant.
 Include survivor benefits in the pension order.
32
SOCIAL SECURITY BENEFITS FOR
DIVORCED WOMEN
 A divorced
woman who was married at least 10
years can receive Social Security based on her
ex-husband’s work record.
 This
has no impact on what the ex or his
current wife receive.
 You
can also receive a divorced widow’s
benefit after the former spouse dies.
33
SOCIAL SECURITY BENEFIT TYPES
 Retirement
 Spousal
 Survivor
 Disability
insurance
 Supplemental
Income
34
SOCIAL SECURITY
RETIREMENT BENEFIT



Retired worker benefit
Full benefit replaces about 40% on average
Full retirement age
 Age

if born between 1943-1954
 Age

66+ 2 months
if born between 1955-1959 add 2 months each year until 1960
 Age

66
67
if born in 1960 or later
35
INCREASE SOCIAL SECURITY
BENEFITS
 May
was born in 1953
 She currently earns $50,000/year
36
SOCIAL SECURITY
SPOUSAL BENEFIT
If one-half of your spouse’s benefit is higher
than yours, you receive the higher amount
Joe’s retired worker benefit:$800
Kim’s retired worker benefit: $300
Kim takes the spousal benefit at $400 a month
(even if divorced, as long as their marriage
lasted at least10 years)
37
SOCIAL SECURITY:
WHAT WOMEN CAN DO
 Learn
the facts
 Know
your basic legal rights: at the
workplace, as a wife, a widow or ex-wife
 Call
800-772-1213 or go to www.ssa.gov to
get an estimate of your future Social Security
benefits
38
WHAT IS LONG-TERM CARE
INSURANCE?

Helps pay care expenses for chronic illness
or injury

Medicaid is available to people with low
income and few assets

Most long-term
care is not covered
by Medicare
39
WILL YOU NEED LONG TERM CARE?
 About
70% of 65+ will need it in some form
 More
people receive services at home vs.
facilities



$21/hour for home health aid
$3,000+/month for assisted living facility
$7,000/month for private room in nursing
home
40
WHERE TO LEARN ABOUT
BUYING LTC INSURANCE
 Find
out if you can buy it through your
employer
 Check
 Learn
with your state insurance commission
more: www.longtermcare.gov
41
SHORT PLANNING HORIZON
Decision to retire made by considering current
ability to pay bills:
Little or no consideration given to long-term
impact of inflation or to impact of unpredictable
expenses
 Little consideration of Social Security claiming
strategies
 Little interest/ability to assess risks

Focus group participants were adaptive and
mindful of need to change expenditures to match
income

Viewpoint is “anything can happen” so adjust as
you go
42
PROCESS OF RETIRING
Major new insights into drivers of voluntary retirement

More “from” than “to”

Often problem/health/family needs driven
Pre-retirees continue to say that they will retire at a later age
than the age that retirees actually did retire
 (age 65 vs age 58 in reality)
Many pre-retirees make retirement decisions with little
discussion or consultation with spouse
Many more expect to continue working in retirement than
actually do
43
HOW TO NOT RUN OUT OF MONEY
IN RETIREMENT
a retirement plan – follow it
 Learn how to invest your money
 Consider working longer or part-time work
 Downsizing early – understanding trade-offs
between owning/selling certain assets
 Consider Annuities
 Make



A way to protect against outliving your money
Guaranteed income for life
Purchased with a lump sum of money
44
SAVE FOR RETIREMENT
 Participate


in your plan at work
Save at least to the match
Find out if you’re covered by a pension
 No
plan at work? Set up an IRA
 Set a goal and know how much you need



Try online retirement planning calculators
www.360financialliteracy.org
www.aarp.org/money
45
HOW MUCH WILL YOU NEED?
OR WILL YOU CUT EXPENSES???



100% of pre-retirement income
Social Security statement estimate
Pension? Contact employer
Pre-retirement income
— Social Security
— Pension
What your savings needs to produce
or you can cut expenses.
$30,000 / year
$13,000 / year
$0
$17,000 / year
46
ADDRESSING RETIREMENT RISKS
 Life-time








income
Market risk
Sequence of returns
Longevity risk
Excess withdrawal
Loss of spouse
Frailty
Elder financial abuse
Possibly even inflation
 Diversified






portfolio
Inflation
Public policy risk
Timing risk
Unexpected expenses
Long-term care
Health care
Source: David Littell, Director,
New York Life Center for
Retirement Income, The American
College, 2015
47
RISK



Risk is risk to one's lifestyle
 Risk that events will take place which force consumption to decline
from the currently determined level.
 The more aggressively one spends the greater the risk to future lifestyle
Risk tolerance
 Willingness to take risk of reductions later in exchange for spending
more now
Risk capacity
 Ability to experience major portfolio losses without too adverse of effect
on lifetime standard of living
 Generally declines at retirement
 Increases when more guaranteed income
 Increases as funding sufficiency increases
Source: David Littell, Director, New York Life Center for Retirement Income, The American College, 2015
48
FINANCIAL TO-DOS
FOR THE DECADES
49
IN YOUR 20S AND 30S
20s
Check out job
benefits
Get into habit of
saving
Start retirement
saving
Strive for a debtfree life
30s
Keep saving,
focus more on
investing
Keep debt in
control
Do an insurance
checkup
50
IN YOUR 40S AND 50S
40s
 Set
a specific
savings goal
 Look at how you
are investing
 Ask for
professional help
 Do an insurance
checkup
50s
Revisit your
savings goal
Take advantage of
higher
contribution limits
Look at how you
are investing
Do an insurance 51
checkup
IN YOUR 60S AND 70S
60s
70s
 Consider your
Start withdrawals
retirement spending
from traditional
strategy
IRAs
by
age
70
½
 Compare pension
Start Social
payout options
Security benefits at
 Consider your health
70 if you delayed
 Consider options if
you can’t afford to
them
retire
52
CAN’T AFFORD RETIREMENT?
earning power –
education/training
 Save more
 Second job
 Work longer
 Delay Social Security
 Reverse mortgage
 Home sharing
 Increase
53
TAKE CARE OF YOURSELF
 Think
 Get
wealth not just health
educated – lots of resources available
 Get
your friends talking about financial
issues – make it fun and less intimidating
54
REAL-LIFE STRATEGIES FOR THE
RETIREMENT YOU WANT
* Develop a Sense of Self-Reliance
 Think About the Future—All the Way to the
End
 Anticipate or Expect the Unexpected
 Design a Budget for Today and for the Future
 Set and Live by Personal Finance Rules
 Stop, Sit Down and Focus on the Future—
Talk about it
55
REAL-LIFE STRATEGIES FOR THE
RETIREMENT YOU WANT (CONTD)
 Engage
in the “What Ifs”
 Put Paper to Pencil, or Cursor to Screen, and
Do the Math
 Gather Information
 Seek Advice
 Get the House In Order—Literally
 Start as Soon as Possible

Source: The MetLife Tips for Types Workbook, Real-Life Strategies for the Retirement you Want,
Matiure Market Institute and Scripps Gerontology Center, Miami University of Ohio, 2013. d
56
CONCLUSIONS




Voluntary retirement often a “push” with women often
pushed by family concerns
 Caregiving impacts wages, benefits and retirement income
Pre-retirement plans don’t happen
 pre-retirees expect to work 7 years longer than retirees
actually did
 pre-retirees intend to do more financial planning than
retirees do
 married women may retire earlier due to spouse’s benefits
Gaps in knowledge and retirement preparation persist
 Women don’t realize the likelihood of living to age 90
Expense reduction/debt management are major strategies to
avoid running out of money
57
FOR ADDITIONAL INFORMATION
Visit WISER’s website
www.wiserwomen.org

Write us for additional information:
WISER
1140 19th St. NW
Suite 550
Washington, DC 20036

Or call WISER: 202-393-5452.
58
THANK YOU!
Cindy Hounsell, [email protected]
Maureen Kelly,
[email protected]
www.wiserwomen.org
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