Have you watched track and field events in the school yard? You know how important winning is for those kids.
It is for you, too. But in the race for a financially secure retirement, female educators may still be running a few laps behind their male counterparts. According to the 2009 Retirement Confidence Survey, men are more apt to be "very confident" than women about having enough money in retirement to take care of basic expenses, medical expenses, and long-term care.*
Like most educators, you are busy. You have obligations to your family, friends, job, students and volunteer organizations. Who has time to think about retirement planning? But putting yourself last is not programmed into your DNA – you must set aside time to learn more about finances to become a more confident and financially successful woman. And no, that is not selfish!
Unique Challenges for Women
Most women will be solely responsible for their finances at some point in their lives. Although retirement planning is important for everyone, women face special challenges:
Longer life expectancies. Women live, on average, five to seven years longer than men.** That means more years supporting yourself and, with the help of a successful investment plan, perhaps even living it up.
Lower wages. According to the Bureau of Labor Statistics, women have average weekly earnings of $693, or 83 percent of the $837 median for men. Although educators' salaries are subject to collective bargaining between your local chapter and your school district, educators may have worked in other jobs that are affected by a pay disparity between men and women.
Interrupted careers. Women are much more likely to take a break during their working years to care for children or aging parents, averaging more than 12 years out of the workforce compared with six for men.***
5 Steps Toward Retirement Security
Fortunately, women do have the power to overcome the hurdles. Here are five ways to help take control of your financial future:
1. Estimate how much money you will need for retirement. The Projected Retirement Expense Calculator can help you estimate what your expenses will be during retirement. Be sure to plan for health care costs in retirement, as this can be one of your biggest expenses. In fact, according to the Employee Benefit Research Institute, a woman retiring at age 65 in 2009 with unsubsidized retiree health benefits may need $266,000 to cover her health care expenses in retirement.† And that does not include the cost of long-term care, should you eventually need it.
Find out whether your employer provides any health care benefits upon retirement and, if so, what the eligibility requirements are. Learn more about covering health expenses before you're eligible for Medicare. Also, you should be aware that when you're eligible for Medicare, it won't cover everything. Learn more about Medicare, Medicare Advantage and Medigap Plans. Like most educators, you won't be able to rely heavily on Social Security.
2. Estimate the size of the gap between how much you'll need and how much you have coming. Use the CalSTRS calculator or CalPERS calculator to help you estimate the defined benefit pension amount you will receive. Then subtract your estimated retirement benefit from your estimated retirement expenses to discover the size of the gap you need to fill with your own savings.
3. Create a spending plan. Cut discretionary expenses whenever possible. If you make your own coffee instead of spending $4 on a latte each morning before school, you can save an extra $1,040 a year. Get rid of unnecessary cable TV channels and cell-phone features. Combine errands or consider carpooling to save on gas. Put the extra money you save toward your 403(b) or 457 plan. Pay off consumer debt as quickly as possible. If you are approaching retirement, strive to pay off your mortgage.
4. Contribute to your 403(b) or 457 plan. If you are not participating, start now. If you are participating, devote all or part of every raise to retirement savings. Consider contributing the maximum amount you can each year, currently $17,000. If you’re age 50 or older, take advantage of catch-up contributions if your plan allows them. Learn more about investing by reading the articles in the About Investing section.
5. Work longer. Working a few more years than you’d planned can give you more time to save and reduce the number of years you have to support yourself on a fixed income. With CalSTRS, you can retire as early as age 50 with at least 30 years of service credit, or you can retire at age 55 with at least 5 years of service credit. Your retirement benefit will be calculated using the formula:
Age Factor x Service Credit x Final Compensation = Retirement Benefit (member only).
For more information, see CalSTRS.org. Under CalPERS, you can use these charts (PDF) to see how working longer affects your retirement benefit.
Winning the Race
Are you letting obstacles stand in the way of a secure and dignified financial future? Take control today. Use the resources available to you on this Web site to learn more about retirement planning and investing. To increase contributions to your 403(b) or 457 plan or change the way your investments are allocated, contact your district's plan administrator.
* Source: Employee Benefit Research Institute, 2009 Retirement Confidence Survey.
** Source: Centers for Disease Control and Prevention, www.cdc.gov.
*** Source: Center for Retirement Research at Boston College, www.bc.edu/centers/crr/.
† Source: Employee Benefit Research Institute, June 2009, Vol. 30, No. 6, www.ebri.org. Savings needed for employment-based health premiums, Medicare Part B premiums and out-of-pocket costs during retirement.