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Is Mom saving enough for retirement?

April 25, 2013

| Money Rates Columnist

According to many recent studies, many Americans simply aren't saving enough for retirement. But for women, the problem may be even more acute. Data released by Ameriprise in December indicate that only 44 percent of women have contributed to a workplace retirement plan (compared to 51 percent of men), and only 19 percent have determined how much money they need to retire (a task 28 percent of men have performed).

Adding to the trouble is the fact that women tend to live longer than men. A longer life requires more retirement savings, and according to the Social Security Administration (SSA), the average 65-year-old woman today will live to 85 years old -- two years beyond her male counterparts. Two years may not seem like a long time, but when you add up all the potential expenses of two years of retirement -- including health care costs -- the figure isn't likely to be modest.

If none of this worries you because you're not a woman who's nearing retirement age, you may be overlooking something -- or someone -- very significant.

Helping mom prepare for her golden years

It isn't your job to prepare your mother for retirement. It is hers. But offering useful advice to a mother who's slightly behind on her planning may help you both avoid troubling situations down the road. While Baby Boomer women may not have much time left to prepare further, adopting certain strategies can help them make the most of what they have.

If you'll be spending time with your mom this Mother's Day, consider asking her how she feels about her retirement prospects. If she seems uneasy or unsure of where she stands, the tips below may help.

1. Do the math

Confronting the reality of your retirement expenses can be unpleasant -- particularly for those who haven't saved nearly enough to meet them. But for men and woman alike, this is a critical component of preparing for retirement.

Encourage your mother to calculate what monthly outlays she'll likely have in retirement, such as housing, transportation, health care and grocery costs. If mom is married, she'll likely want to do this with her spouse. She can then compare this figure against any Social Security benefits she and her husband expect to receive. She can get a rough sense of future benefits by using Social Security's Retirement Estimator, though as you'll read below, she shouldn't consider this estimate the definitive statement on her entitlements.

She can then add in any other income she expects to receive, such as savings account interest, dividends, pensions or rental income. This will give her an idea of how much she may need to dip into savings -- or cut expenses -- to get by each month.

2. Don't get discouraged

If mom discovers that her expenses are likely to exceed her means, she still shouldn't write off saving. If she has a few years until retirement, there are ways to boost her retirement funds more quickly. The most obvious involves workplace retirement contributions. If your mother isn't contributing to hers and her employer offers a company match, she is essentially throwing away free money for retirement.

Investing more aggressively is a common approach to boosting your funds in today's low-interest-rate environment, but this is a risky strategy for older investors. If mom wants to earn more on her savings with less risk, she should look into getting the highest possible yield on her FDIC-insured deposit accounts. The top-paying accounts today may offer up to five times the interest of average accounts, according to recent MoneyRates.com research. So keeping her savings in an average account is another sure way to forfeit money that could go to her retirement fund.

If mom is already contributing to a workplace fund and using a high-yield savings account, she should review her retirement plan contribution amounts to make sure she's contributing the most she can. The IRS boosted the amount that savers can contribute to 401(k) accounts and IRAs for 2013, and savers older than 50 may also be eligible to make catch-up contributions above and beyond normal allowances.

3. Dig into Social Security

Unless she's already done some research, your mother may assume that the amount of Social Security she will receive is written in stone. But this couldn't be further from the truth. Deciding when to draw benefits is an important factor in determining the amount of money she'll get from Social Security each month. Generally speaking, the longer she waits until age 70, the higher her monthly benefits will be. But there are other strategies beyond this for maximizing Social Security benefits.

In particular, she shouldn't forget to explore Social Security spouse's benefits. If your mother and her spouse have reached full retirement age, she may be eligible to receive a monthly spouse's benefit in lieu of her normal benefits that won't reduce her later payouts or her spouse's. This is true even if her spouse hasn't started collecting benefits. This can allow her to delay collecting her normal benefits, allowing them to grow each year until age 70 through delayed retirement credits.

Better yet, she doesn't necessarily need to be married to claim a spouse's benefit. If your mother's former marriage meets certain criteria, she may be able to draw a spouse's benefit from that relationship while letting her own benefits grow.

4. Consider an encore

Your mother may not relish the thought of continuing to work past 65. But working in retirement doesn't have to mean occupying the same position that she chose for her career. Encore careers are jobs that allow people to enjoy retirement on a part-time basis while still earning income that helps supplement retirement funds.

Common encore careers include part-time and freelance positions that build on past career skills, such as working as a tutor, offering catering services or writing. In addition to addressing retirement shortfalls, part-time work can offer a way to stay active and explore new roles in the workforce.

To make a more seamless transition, your mother may begin preparing for her encore career before she leaves her full-time job. Moonlighting at her encore job for a few months may help her get a sense of how much income it can produce and what her workload may be.

Reversing the roles

If you were lucky, your mother helped guide you through your formative years and has offered comfort and support ever since. But even if she was deft in helping you survive your youth, there's no guarantee that she's equally prepared to navigate her retirement.

Naturally, if you ask your mother about her retirement plans and she tells you that she knows what she's doing, it may be best to let it be. But if she seems willing to talk about it, the least you can do is listen. It's what a good mother would do for you.

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