Q&A: Steps To Help Women Plan Successful Retirement Savings

SACRAMENTO, Calif. - When it comes to retirement planning, most women prefer to make their own decisions but rely primarily on friends and family for advice. Few have a written plan for retirement and most admit they "guessed" how much they'll need to live on. Only 8 percent feel "very confident" about their ability to retire comfortably.

Those are among the findings of a national survey of retirement trends released this week by the Transamerica Center for Retirement Studies, based in Los Angeles.

Now in its 12th year, the survey talked with more than 1,800 women and compared their responses with those of men.

McClatchy Newspapers discussed the findings with Catherine Collinson, president of the retirement studies center. Here's an excerpt:

Q: It's been well documented that women tend to be less financially prepared for retirement than men, partly because they typically earn less in lifetime income, take more time out for parenting or caregiving, and have fewer pension or 401(k) reserves. Based on your decade of surveys, is that changing at all?

A: Yes and no. We are seeing some changes in the right direction; however, we're not seeing enough change. For women working full time, we're seeing really encouraging signs. For the first time, women in the workforce full time are just as likely to have access to a 401(k) as men. And the participation rate is on par with men. It's 84 percent, which is as high as we've seen.

Q: Fewer than half of women surveyed felt "somewhat" or "very" confident about retiring with a comfortable lifestyle. How much of that can be blamed on the recession?

A: Even before the recession, retirement confidence was low. Now it's even lower. In many ways, the recession has been a huge setback for retirement savings for men and women. Unemployment, (stock) market volatility and low interest rates make ... the challenges facing retirement even more challenging.

Q: More women than men said they relied on friends/family for advice on retirement planning. Is that a good or bad strategy?

A: These types of conversations are important for women to have. Given that women are more likely to be a parent or take care of a parent, we need to understand the long-term implications. The (financial) tradeoff they might be making ... can have a lasting effect.

In 2003, I faced difficult choices when I became my grandmother's caregiver after her stroke in Sacramento. The responsibility fell on me (single and living in Los Angeles). Dealing with the financial and emotional aspects, I had to carefully weigh a lot of decisions (including whether to quit her job).

Evaluate the tradeoffs, talk about it, find out how family members can help. It's important to consider potential lost income, lost access to health and retirement benefits and the difficulties of re-entering the workforce.

Q: Fewer women in their 20s (17 percent) figure they'll be able to count on Social Security for retirement income, compared with 60 percent of women in their 60s. Is that a smart realization of retirement realities?

A: For women in their 20s, clearly there's concern about the long- term security of Social Security. ... It really is incumbent on them to start saving the minute they enter the workforce. It's not an enviable situation, especially since so many (have) pretty substantial debt from student loans.

But as women in their 20s enter the workforce, they're having access to a 401(k) at a much younger age. For older women in their 50s and 60s, when they entered the workforce, 401(k)s didn't exist.

Q: Was it surprising that so few people - men or women - said they use a personal finance professional?

A: That was surprising. ... You want to ask questions and seek guidance from a reputable adviser who's trustworthy. In the last five years, there've been some pretty high-profile advisers, like Bernie Madoff, who haven't been trustworthy. ... You have to do your due diligence: Be sure they have the right credentials, have good personal references and a good track record.

Q: The survey noted that few are aware of the so-called "Savers Credit" for catch-up contributions to 401(k) and IRAs. Why is that tax credit overlooked, and what does it mean for those nearing retirement age?

A: We need to get the word out. It's a really meaningful tax credit for low-to-middle-income workers. When it started 10 years ago, there was tremendous promotion of (catch-up contributions and their tax credits), but today we're not talking and promoting them enough.

(IRS rules allow those 50 and older to make additional IRA and 401(k) "catch-up" contributions, to boost their retirement savings. A certain percentage, based on income formulas, can be taken as a tax credit.)

If an individual is entitled to $20 or $200 or $500, they're leaving (money) on the table if they don't know about it. And those funds could be put to work for you.

Q: Your survey offers women a number of retirement-readiness recommendations. Can you elaborate?

A: Calculate your retirement needs. There are so many online calculators, including from Transamerica, AARP (no matter your age), personal finance websites (SmartMoney to Kiplinger's), banks, retirement plan providers, brokerage firms. And they're free.

It's important to try more than one. ... You'll notice they yield different results. A lot of calculations are based on assumptions, like how long you expect to live. It's really important to compare and contrast.

Write down your retirement strategy. Like diet and exercise, if you document (your goal), it has psychological benefits. You're making a contract with yourself. Especially if, starting in your 20s and 30s, you want to track and monitor your progress over time. Have that document so you can make necessary adjustments along the way.

Consider retirement benefits at any job. If your employer doesn't offer a plan, ask for one. The worst that happens is they say no. But they might say yes. If you're evaluating job opportunities, factor in the benefits package, such as a 401(k) match.

Have a backup plan. Few men or women have a backup plan in case they can't keep working. What would happen if you were forced into retirement sooner than expected? Have a conversation with family and friends. Know where your finances stand. How would you handle health care coverage? If it's necessary to downsize, what are the best ways? Have ideas and back-pocket solutions in case you're forced into retirement, either for health reasons or job loss.