suntimes
GRACIOUS
Weather Updates

Prospects bleak for widows living only on Social Security

Financial security becomes even more important for older women as they are more likely outlive their spouse.

Financial security becomes even more important for older women as they are more likely to outlive their spouse.

storyidforme: 7978566
tmspicid: 2202352
fileheaderid: 1074542

Updated: May 31, 2011 4:47AM



Fear of being a “bag lady” is the secret worry of every older woman. I’ve written and talked about this before, and the subject always gets a nod or a grimace of recognition.

No woman wants to be a burden on her children – or grow old alone, worry about money.

But the latest reports show we aren’t doing enough to deal with this fear — or the reality of the growing number of elderly women living in poverty. A new report by the Society of Actuaries states the case clearly: 92 percent of female retirees are not planning long-term for retirement.

The statistics are grim.

*Half of women who reach age 65 are likely to live until age 85.

*Eighty-five percent of women over age 85 are widows, compared to 45 percent of men.

*Four out of 10 women over 65 living alone depend on Social Security for virtually all of their income.

*Women are likely to have a longer period of chronic disability and are more likely to need care in a long-term facility or from a paid caregiver. This is compounded by the fact that women are more likely to be alone in old age and less likely to have a family caregiver.

*Fifty-five percent of female retirees and 71 percent of female pre-retirees are concerned that they might not have enough money to pay for health care costs in retirement, compared to 42 percent of male retirees and 63 percent of male pre-retirees.

But the message isn’t yet getting through — especially to younger women. Many are stuck paying off student loans, or trying to raise a family, so they feel they have no spare change to put away for retirement. Others have been disillusioned by the stock market crash, and have stopped contributing to retirement plans and IRAs.

“Our study on the impact of retirement risks for women is meant to be a call to action for women to educate themselves on retirement-related risks, better prepare for the long-term and, hopefully, avoid financial shortfalls,” says Chicago actuary Anna Rappaport, FSA, MAAA and co-author of the SOA report.

Get started on retirement saving now

Here are three steps women (or men) can take now, in your 30s or 40s, to avoid the retirement crunch:

1. Get real numbers. Don’t just shrug and think the numbers are too huge to contemplate. There’s a simple and compelling calculator at www.ChoosetoSave.org. (This is the website of the Employee Benefit Research Institute.) Just click on “Ballpark Estimate” and you have the only tool you’ll need to get an honest projection of where you stand now based on current savings (or lack of savings) and a realistic projection of how much you should be saving each month or year, so that you won’t become a bag lady.

2. Start saving. Start with $50 – and add an automatic $50 every month. You can do that by opening an Individual Retirement Account at T. Rowe Price mutual funds (www.TRowePrice.com or (800) 638-7890). They’ll help you chose an appropriate mutual fund, and you can set up an automatic monthly deduction from your checking account. You can always add more money at any time.

You must have earned income to contribute, and you can put away up to $5,000 of earned income in 2011 – or $6,000 if you are age 50 or older this year. If you are single and earning less than $107,000 AGI, or married earning less than $169,000, you can make it a Roth IRA. You won’t get a tax deduction for your contribution, but you will get tax-free growth of all your money.

3. Buy disability insurance, critical illness, or long-term care insurance.

*Disability insurance will replace your monthly income if you are unable to do your own occupation (that definition is critical in your policy). You’ll need to have a regular income to purchase this type of insurance.

*Critical illness insurance is a policy that pays you a lump sum when you are diagnosed with any of eight major health problems, including cancer or stroke. You can use the money for any purpose.

*Long-term care insurance will cover you in case you are unable to do basic activities such as dressing, feeding, bathing, or simply getting from bed to chair. While this is mostly seen as insurance to be used in old age, there are many younger accident victims (think Superman, Christopher Reeve) who have benefited from this type of insurance. So it make sense to buy a policy in your late 40s.

All of these insurance coverages are designed to keep you from being reliant on the state for care – especially in these tough times when care is being rationed because of a budget crisis in every state.

If you’re a woman reading this column with a smile, because you’re well on your way to retirement security, clip it and hand it to another woman. Post it on the office bulletin board. Text a link to your daughter’s friends. Spread the word: Starting early with a small, regular contribution to retirement savings will do a lot to keep you from being a bag lady. And that’s The Savage Truth.

Terry Savage is a registered investment adviser.



© 2014 Sun-Times Media, LLC. All rights reserved. This material may not be copied or distributed without permission. For more information about reprints and permissions, visit www.suntimesreprints.com. To order a reprint of this article, click here.