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Planning for Retirement

Tracy M. Thornton, County Extension Agent for Family & Consumer Sciences

Retirement planning is important for all individuals; however, it is especially important for women.  At some point during their lives, 80 to 90 percent of women will be solely responsible for their own finances.  Unfortunately for the majority of them, it will be later in life.  Women tend to have shorter work histories than men, as a result of entering and leaving the workforce due to raising children.  In addition, fewer women participate in employer-sponsored retirement plans compared to men. 

One of the first things you should realize as you begin thinking about retirement is where you will get your money. You can think of retirement savings plan as a three-legged stool, with each of the legs being one source of retirement income.

The first leg is Social Security. For many women, Social Security is the main source of retirement income. Social Security eligibility is based on your lifetime earnings record and your age. This requires you to meet work requirements yourself or be married to someone for at least 10 years who meets the work requirements. Employed women who are married, widowed or divorced after at least 10 years of marriage are said to be dually entitled and can collect the higher amount between their own Social Security benefits or their spousal amount. You should understand that there are some ways your benefits can be reduced including if you earn income after you have retired and/or you are between the age of 62 and full retirement age when you start receiving benefits.

Full retirement age varies by the year you were born. For example, full retirement age for people born before 1937 is 65.  For those born between the years 1943 and 1954, full retirement age increases to 66. To determine your retirement age, visit the Social Security Administration’s website

As a general rule, your Social Security benefits over your lifetime will be the same, whether you retire late or early. If you retire early, the monthly benefit amount is smaller to take into account that you will likely receive your benefits over a longer period of time. If you retire late, you will likely get benefits for a shorter amount of time, so your monthly benefits will be larger.  Receiving Social Security early or late can each have advantages and disadvantages, and when you decide to retire, should be based on your current situation.

The second leg is employed-sponsored plans. This leg is often the one that is missing for many women. These plans include defined benefit plans, which guarantee a specific monthly amount, and defined contribution plans, which grow tax-deferred but do not guarantee specific retirement benefits. Most employers today are offering the defined contribution plans, including 401 (k), 403 (b), Section 457 plans, profit sharing, stock bonus plans and money purchase pension plans.

Unfortunately, the first two legs of the stool typically do not provide enough money to meet the needs of individuals during their retirement years. Most need the third leg which includes personal savings and investments. To find out how much additional income you’ll need, you should contact your local Social Security office and ask for a Request for Earnings and Benefit Estimate Statement. If you have an employer-sponsor retirement plan, contact your human resource or benefits office to get a pension estimate. With this information, you can get a ballpark estimate of how much your retirement savings is estimated to be when you retire and how much additional income you’ll need to comfortably retire. To get a more accurate estimate of how much money you’ll need to retire, take into account the rate of inflation. The average annual rate of inflation from 1914 to 2010 has been 3.38 percent.

Making these calculations well in advance of your retirement, can give you enough time to save enough money.  If you wait until you’re about to retire, it may be too late to put any more money aside.

For more information, contact the Butler County Extension Office at 112 E GL Smith Street, Morgantown or call 526-3767.

Educational programs of the Kentucky Cooperative Extension Service serve all people regardless of race, color, age, sex, disability, or national origin. 


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