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Money: Ten things women should know about retirement

1) Anticipate you are likely to live a long life and plan accordingly. In fact, according to the U.S. Census Bureau, a woman who reaches age 50 today without serious health problems, statistically can anticipate celebrating her ninety-second birthday.

2) There's also a statistically good chance that you'll outlive your spouse. Women, on average, outlive their spouses by about seven years. If investing has not always been priority, you should start learning it now.

3) Pay yourself first. Invest for your future now. By investing systematically over a period of time, instead of paying monthly bills first and then saving whatever is left, you will be surprised how fast your nest egg can grow. Using a dollar-cost average strategy you can "pay yourself first" through systematic purchases of shares of selected mutual funds. (This strategy does not guarantee a profit or protect against a loss. Investors should consider their willingness to continue purchases through periods of low prices.)

4) Fund your 401(k) or other employer-sponsored program to the maximum. You can build up a good portion of your retirement savings if you contribute as much as you are allowed to into deferred-income plans such as 401(k). Not only will you reduce your current taxable income, the tax-deferred compounding feature of these plans allows you to accumulate more than you would in a comparable account that taxes earnings each year.

5) Choose an IRA that's right for you. You can use an IRA & Pension Calculator to compare the projected results of contributing to different types of accounts and of transferring from a traditional IRA to a Roth IRA.

6) Before you switch jobs, check on your complete benefits package and the portability and vesting rules of your retirement plan. The U.S. Bureau of Labor Statistics reports that, on average, working women over age 25 switch jobs every 4.8 years. This job-change frequency prohibits the growth of retirement plan vesting requirements often set at five years.

7) Check on your Social Security benefits. The Social Security Administration reports that 66 percent of retirees rely on Social Security for half or more of their income, with the average monthly payment for women totaling $601. Clearly, Social Security should be thought of as supplementary income during retirement and not a main source of funds.

8) Beware of being overly conservative in your investments. While there is a correlation between your age and the amount of risk you should assume when investing, being too conservative could seriously erode the value of a retirement account that you may need to rely on for thirty years or more. That's why you should think of retirement as a long-term investment and consider keeping a significant portion of your portfolio invested in stocks as long as possible.

9) Consider long-term-care health insurance. You can't afford to ignore this important insurance need when you consider that the cost of spending a year in a nursing home could run to $60,000 or more and easily deplete your entire retirement reserve. (Source: Health Insurance Association of America, 1994)

10) Don't leave everything to Uncle Sam. You owe it to your heirs to establish an appropriate estate plan. Without proper planning, estate taxes (that may range from 37 percent to 60 percent), state taxes and income taxes on retirement plan distributions could reduce your estate by more than 75 percent (if the majority of your assets are in qualified plans and individual retirement accounts). Essentially, your heirs may receive only a fraction of all you've worked so hard to accumulate.

 


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