1. If an employer does not offer a good retirement plan, women should consider their options for securing better benefits. While companies with defined benefit plans that replace a percentage of income (based on salary and years of service) are becoming increasingly rare, due consideration should be given to the long-term consequences of a job with a firm that does not at least match contributions to a 401(k) or other defined contribution plan. Those who are lucky enough to be employed by a company with a traditional pension plan should find out what their benefit is likely to be, and at what age they can collect the maximum benefit.
2. Take advantage of the tax benefits of qualified retirement plans and traditional Individual Retirement Accounts (IRAs). Depending on an individual's financial situation, many people find that making pre–tax contributions to a retirement account does not significantly reduce the amount of money they have available to spend. Contributions may decrease current taxable income (and, consequently, an individual's ultimate tax bill) and earnings are tax deferred. Taxes will be due when distributions begin.
3. Consider the role a Roth IRA may play in a long–term plan. Contributions to Roth IRAs must be made with after tax dollars, but earnings grow tax deferred, and qualified distributions made after age 59½ are tax free provided the account has been owned for five years.
4. Consider planning to work longer if necessary. Even a few extra years spent working will provide the chance to save more money towards retirement. Costs may also be substantially lower if retirement is put off until you qualify for full Social Security and Medicare benefits.
5. Consider paying off mortgage and other debt as quickly as possible. Owning a house outright in retirement not only ensures a place to live, it can also serve as a valuable source of equity, should it be needed. As an incentive to pay off credit cards, resolve to turn monthly credit card payments into retirement account contributions, when the debt is gone.
6. Married women should assess the capacity of their husbands' retirement benefits to meet their future needs. Given that half of marriages end in divorce, and the average age of widowhood is 56, it is essential to plan for the possibility of managing alone. Women who stay at home while their spouse is working may want to consider setting up an IRA in their own name. Women should also find out what rights they may have to their spouse’s pension in the case of death or divorce, and the effects that divorce and remarriage would have on their Social Security benefits.
7. If the family budget is tight, women might want to carefully evaluate the benefits of putting extra funds into their own IRA or 401(k) versus putting money in a savings account for their children's college education. Children may be able to get financial aid or low–interest loans to help pay for college, but there are no grants or scholarships for retirement. Also bear in mind that some funds may be withdrawn from a retirement account penalty free if used for qualified education expenses.
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