Study Finds Homemakers are Unprepared for Retirement

November 4, 2015
Study Finds Homemakers are Unprepared for Retirement

Countless studies on longevity and aging frequently confirm the fact that women usually outlive their male spouses. All too often, wives are left on their own with inadequate finances to make ends meet. Dreams of living the good life, relocating or traveling are often completely out of reach. Even for two-income couples, saving for retirement has become more and more of a challenge. Especially within the last decade, factors such as a shaky economy, low wages, and the aftermath of the housing crisis have all taken a toll.

Perhaps the most at risk group for being left in unstable financial situations are America’s homemakers. A new study from the Transamerica Center for Retirement Studies and the Aegon Center for Longevity and Retirement uncovered some startling statistics. According to those findings, “two-thirds of homemakers aren’t prepared for retirement and more than half — 51 percent, have no strategy at all.” Eighty-one percent of the nation’s full-time homemakers are women and most of them could be at greater risk for financial insecurity during their retirement years.

In reviewing 2013 data from the U.S. Census Bureau, it came to light that 49.7 percent of women 65 and older were widowed, divorced or separated. The issue becomes quite apparent, since just 22.8 percent of men within that same age bracket are left alone. In addition to that quantitative disparity, the financial analysis is alarming. The Government Accountability Office reports that after a divorce, a woman’s household income falls 41 percent. That is almost double the reduction in household income for men. Women whose husbands die are also left in more dire circumstances than men. Widows experience an average income drop of 37 percent, while men lose just around 22 percent.

Things are changing for the better, thanks to an increasing number of resources aimed at helping women achieve financial independence. However, in spite of advice from financial wizards like Suze Orman and Clark Howard, a Prudential study revealed that only one third of women would give themselves a grade of “A” for their ability to manage money. No wonder another research project found that homemakers in the U.S. view the retirement years as a period plagued by financial insecurity and health problems.

In light of this news, Forbes magazine financial editor, Ashlea Ebling has a few strategic steps that all women, not just stay-at-home moms and homemakers, should embrace:

  • Create a financial plan — Have a sit down with your spouse or significant other and develop a budget, short-term financial plan and a long-term plan for retirement. The goal should be to understand your financial status and to identify the steps needed to improve it.
  • Individual Retirement Account — For homemakers who do not work outside the home, it’s a good idea to file a joint tax return with the working spouse-these are referred to as a spousal IRA.
  • Wives should educate themselves about their spouse’s financial affairs — Discuss topics such as outstanding debt, savings, life insurance policies, 401(k) plans, mutual funds and so on. Ask your spouse to provide pertinent details on all of these accounts as well as information regarding the terms and procedures for receiving funds and details on the designated beneficiaries.
  • Know where you stand with Social Security benefits — Learn what will be necessary when it comes to filing and claiming benefits. Ebeling also suggests this book:
  • Get a part-time job — With the kids likely grown and gone, most homemakers will have time to work outside the home. It’s never too late to build a little nest egg for the future or bring in extra income to ease expenses. With wages from a part-time job, learning how to invest wisely in high yield mutual funds is another smart strategy for getting the most bang for the buck.
  • Have legal documents in order — Become educated about matters such as financial power of attorney, healthcare power of attorney, wills, trusts, and so on.
  • Plan for the long haul — Given that women do typically live longer than men, learn about your partner’s retirement plan and issues such as joint and survivor annuity. In case your spouse dies, how long would you receive payouts and for how much? Ebeling also suggests:

The bottom line is this: with all of the resources available today, it has never been easier for women to become informed and empowered in regard to their future financial status.

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