Even if your original retirement plan is as a couple, it might be a good idea to consider the possibility that you could become a widow at some point during your retirement. According to statistics, 80% of women outlive their husbands by an average of 14 years. When you take these figures into consideration, you may possibly have a decade or more that you will have to live as a widow.
Outliving your husband is a real possibility, and for this reason, as a couple you should approach retirement planning with a combination of a couple of different strategies. The first thing that you’ll want to do is spend less than what you may have been planning. The average withdrawal rate is 4%, but this may be too much, especially considering the current state of the economy. It is a better option to evaluate your financial situation each year, and adjust your spending higher or lower according to your gains or losses.
Another strategy would be to invest about 80% of your retirement savings in stock. Although this may seem very aggressive, and a risk, you will likely have more income if your investments are paying dividends. Even during the economic crisis, people with dividend paying stock had income coming in from returns on their investment.
If possible, you will want to invest in a large number of companies instead of investing a big chunk of your money in only a couple. Divide your investment money between several companies that have solid growth potential. Some of these companies are brands that everyone is familiar with, such as Coca Cola, McDonalds, etc.
You won’t get rich with this strategy, but over the long term you will get returns, and there is little doubt that your investments will be safe. Many women prefer this type of investment strategy because it is safer than investing in mutual funds. When you invest in mutual funds, it can be difficult to know just how much growth you can expect in the future.
Planning for a secure income later with reliable investments is the best retirement plan for women.
To ensure that we all have enough to live on during our golden years, the IRS will penalize you for withdrawing money early from your retirement accounts – up to 10% in most cases – above and beyond the taxes you’ll pay on the money you have withdrawn. Think of it as the government’s way of enticing you to save. Sometimes we need that money sooner than later and penalty or not, we’re forced to dip into our retirement funds. Is there any way around all those extra fees?
One option is equal periodic payments from your retirement account or IRA, using the “substantially equal periodic payments” rule (SEPP). This little known rule allows you to withdraw money in equal and regular payments, at least once a year for the remainder of your life and/or your life and the life of your beneficiary.
To satisfy the criteria for this rule:
You can also avoid the penalty if you withdraw from a qualified retirement plan (other than your IRA) as long as you are at least 55 and are no longer working for the respective employer. So, if you quit your job after you turn 55, you can freely withdraw funds from your retirement plan without worrying about extra penalties.
In addition, many companies provide an employee stock ownership plan. Employees who are eligible to be paid stock monies can take a distribution from this plan anytime and not have to pay a penalty or early distribution tax.
Also remember that if you need to use your retirement account to pay child support or alimony, you will not be penalized for withdrawals for these purposes. You can also withdraw money in order to divide your estate with your ex-spouse. To qualify, you must have a Qualified Domestic Relations Order from a court that states the money is going to an alternate person than the account holder.
If you contributed more money to your retirement account than you were eligible to deduct on your taxes, you can take that money back and not pay the early withdrawal penalty. Be sure to remove the money before you file your federal income taxes.
If you are in dire need of withdrawing from your retirement plan, speak with a financial planner to figure out the best route to avoid any penalties. Anderon, Dorn & Rader has highly-rated professionals that can help guide you.
