Without adequate planning, boomer women are at a significantly higher risk than their male counterparts of ending up in poverty in retirement. Mary Quist-Newins, a certified financial planner, State Farm Chair in Women and Financial Services and an assistant professor of Women's Studies at The American College, Bryn Mawr, Pa., delivered this cautionary message during a session at the National Association of Insurance and Financial Advisors' annual meeting, held here last month.
"The sad reality is that many American women retire poor," said Quist-Newins. "Three out 4 Americans living below the poverty line are women. It's a retirement nightmare."
Particularly alarming, she added, is the fact that 80% of widows living in poverty were not poor when their husbands were alive. And significant percentages lack a basic understanding of financial concepts. Fifty-nine percent, 47% and 46% of those polled in an American College survey, for example, were not well acquainted with annuities, mutual funds and long-term insurance, respectively.
While 93% of boomer women say that saving for retirement is their primary investment goal, 47% are not contributing to a retirement plan. And only 30% have tried to understand how much they will need in retirement.
Quist-Newins further noted that 80% of women surveyed in a Prudential Financial study said they expected that Social Security would serve as their primary source of income. Women retiring today represent about two-thirds of all Social Security beneficiaries.
Hence the need for boomer women, and their advisors, to understand Social Security provisions that often get left out of retirement planning. Quist-Newins observed, for example, that a woman seeking a spousal benefit is eligible to receive up to 50% of her husband's retirement benefit.
"The wife has to wait until her full retirement age to get the full 50% benefit," said Quist-Newins. "So even if my husband retires early, say at 62, as long as I wait until my full retirement age, 67, I'd still get 50% of his full retirement benefit. I don't get penalized for him taking his benefit early. Also, I would be eligible to receive the greater of the benefit on my own earnings or my spouse's earnings."
Respecting Social Security survivor benefits, Quist-Newins said a widow would be entitled to 100% of her deceased husband's retirement benefit upon reaching full retirement age. Also, a divorced spouse who had been married 10 years or longer can receive the same benefit so long as she doesn't remarry before age 60.
