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We are halfway through the first decade of the new millennium, yet women are still at a disadvantage when it comes to planning for their retirement.

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Unfortunately, the average woman in today’s society still does not get paid a comparable amount for equal work.  That often means that the pensions earned by women in the workplace are not as high as their husband’s.  Another related factor is the time women lose from work while they are taking maternity leave, often with little or no compensation.  The practice of extended maternity leave is on the decline, and I am seeing more and more mothers returning to work after six weeks of giving birth, often it is for fewer hours that translate into lower pay -- and lower pay begets lower benefits.  Looking at the big picture, this gives them fewer years of coverage for Social Security, and if the employer has a Defined Benefit plan, less monthly income at the time of their retirement.  An additional issue affecting many women is that they tend to live longer than their spouses – on average four to six years longer.  Unless these factors are planned for correctly, it could mean financial difficulty in later retirement years. 

The division of financial responsibility between spouses is another problem that I frequently observe.  Often the husband oversees the family’s investments; his spouse does not want to get involved either because of fear of not understanding the finances or not wishing to argue with her husband.  Even though more and more women are taking higher-level professional jobs they still seem to defer to their spouses when it comes to financial decisions.   Women should not shirk this responsibility.  Decisions that affect the family should be shared, and women owe it to themselves to be as aware as possible of their retirement position and finances.  The first step in assuming this responsibility is to maximize your employer’s pension.  If you’re eligible for a 401(k), 403(b), or 457, regardless of what your spouse is doing with his pension, you should be contributing the maximum to your account.  That generally means that in addition to your employer’s contribution, you can add your own deductible contribution of up to $15,000 a year ($20,000 if you are over age 50) to your retirement account.  This is a great step towards not only achieving a comfortable retirement for both of you, but for filling in the potential gaps that may likely occur in the future when statistics tell us that the wife will be alone.  These stats are based on two primary events: a woman’s greater life expectancy and the effects of divorce. 

Each year on your birth month, the Social Security Administration sends you an estimate of your Social Security benefits.  You should use this information to begin your planning.  Ask your benefits administrator for a projection of your pension and ask your husband to inquire about his estimated pension.  Add that to your Social Security benefits and at least you will have the preliminary information to know what your retirement finances might look like. 

If either of you have a conventional Defined Benefit plan that will pay a monthly pension, you must understand your options.  Do you have an option to take a lump sum; if there no a lump sum option, what is the best alternative?  Often the principal bread winner thinks that the best benefit is to take the largest monthly pension that is available; that can lead to unintended and unfortunate results.  I have seen too many widows come into the office whose husbands elected to take the maximum monthly pension, thinking that they would live for many years post retirement.  The maximum pension provides no survivor benefits; unless there is a sizeable life insurance policy, an enormous strain has been placed on the surviving spouse if the husband passes away early in retirement.  Not only do you lose the pension, but you also lose at least 33% of the total Social Security benefits that you would be entitled to. 

Remember that a retired spouse is entitled to the greater of her own Social Security benefit or one-half of her spouse’s benefit.  So, not only would you lose your husband’s pension if not properly protected, you would also lose the lesser of your Social Security.  These circumstances could change what looked like a comfortable retirement into a severe economic squeeze, which is why I recommend that you also maximize your own pension.  If you do not have enough to retire on with your own pension, you can at least manage the gap while deciding what additional actions need to be taken.  Options include taking out life insurance on your husband to cover any economic shortfall.  This is generally not the best choice since it is more expensive to do this than for your husband to invest in a joint and survivor pension.  However if your husband has already locked in his pension option, then insurance may be your only viable alternative -- unless of course you want to sell the house to make up the difference.  If both of your pensions are Defined Compensation plans (401(k), 403(b), Profit Sharing plans etc.), then lump sum options are usually available.  Under these circumstances, taking a lump sum and rolling it over into an IRA account will minimize the disadvantages of choosing the pension option, however, the beneficiary designation here is the crucial issue. 

Now let us discuss one subject that impacts many women’s retirement success; yet while it is happening, retirement is the last thing being considered.  That subject is divorce.  Since this topic can fill an entire book by itself, my goal here is to bring to the surface the most common mistakes that women make related to divorce settlements that can negatively effect their retirement.  Although each state has different rules about the division of assets after a divorce, we can divide most states into community property states and equitable distributions states.  In a community property state the assets are supposed to be divided in half; in equitable distribution states the division is supposed to be equitable not necessarily equal.  However, the mistakes that are made in the type of asset the female spouse chooses are similar. 

Generally, after a divorce, you are looking for current income and a roof over your head.  So, wives often take the whole house and other assets in lieu of retirement assets.  Here is where the trouble starts.  Except for short bursts of time, real estate underperforms other equity classes.  Also, even if your house is fully paid off at retirement, you are likely to own an asset with a significant amount of useless equity.  Unless you are willing to sell your home to raise assets to support your retirement, you could end up with a relatively high net worth but no retirement income. 

On the other hand, if you were to overweight your share of retirement assets at the time of divorce, you might end up with little money to live on.  So here is the conundrum.  You and your advisors need to analyze the true future value of the assets that each spouse is taking post divorce and make adjustments to allow for different values based on current valuations and those at retirement.  That is why we are now seeing planners trained in the field of divorce planning, so that at the absolute least, each side knows the true value of the divided asset.  It is my recommendation that if you find yourself in this unfortunate position, remember to bring an advisor to the table that fully understands this area and at least helps you understand what you might be giving up in the future for an asset of lesser total value today.   Even during those times when you are focused on something totally different, your retirement is affected by a multitude of factors that if not diligently tracked will fall out of your control.

Although women are making progress in the workforce, I still see retirement issues all the time.  So now is the time to sit down with your spouse to get a handle on your pension and IRA beneficiaries, look into your own pension options, and start to take your retirement into your own hands.