A Retirement Income Roadmap for Women

Posted by Busey Bank on Mar 25, 2024 9:30:00 AM
Busey Bank

More women are taking charge of their own retirement planning than ever before. No matter your goals for the future, you'll need a plan designed to support the retirement lifestyle you envision and help reduce the risk that you'll outlive your savings.

A woman sits at a table, reading a piece of paper.

When will you retire?

Establishing a target age is important, because when you retire will significantly affect how much you need to save. Consider the following as you plan:

  • The longer you delay retirement, the longer you can build up tax-deferred funds in your Individual Retirement Accounts (IRAs) and employer-sponsored plans such as 401(k)s or accrue benefits in a traditional pension.
  • Medicare generally doesn't start until you're 65. Does your employer provide post-retirement medical benefits? Are you eligible for the coverage if you retire early? Do you have health insurance coverage through your partner's employer? If not, you may have to look into COBRA or a private individual policy, which could be expensive.
  • You can begin receiving your Social Security retirement benefit as early as age 62. However, your benefit may be reduced by as much as 30% by not waiting until your full retirement age. Conversely, if you delay drawing benefits until your full retirement age, you may be able to increase your Social Security retirement benefit.
  • Under certain circumstances, divorced spouses may be eligible to draw against their ex-spouse’s benefit if it’s higher.
  • If you work part-time during retirement, you'll be relying less on your retirement savings, leaving more to potentially grow for the future.
  • Working part-time could allow you to ease into retirement earlier—plus you may also have access to affordable health care if you are not yet Medicare eligible. However, counting on working part-time could be a gamble, as opportunities may not materialize, or your health may preclude it.

What will you do?

Understanding what you will be doing during retirement will help determine what your expenses may be and what income you will need. As a woman, you should plan for 20-30 years of retirement. How will you fill your time, and where:

  • Will you move?
  • Focus on volunteering or a hobby?
  • Travel?
  • Buy a second home?

Project your retirement expenses

Once you target your desired retirement age, how long it may last and the lifestyle you want, it's time to estimate the amount of money you'll need to make it all happen. One of the biggest retirement planning mistakes you can make is to underestimate the amount you'll need during retirement. It's often suggested you'll need 70% to 80% of your pre-retirement income in retirement—however, this approach has flaws.

Focus on your actual expenses today and think about whether they'll stay the same, increase, decrease or even disappear by the time you retire. While some expenses may disappear, like a mortgage or costs for commuting to and from work, other expenses, such as health care and insurance, may increase as you age. If travel or hobby activities are going to be a bigger part of your retirement, be sure to factor in these costs as well. And don't forget to take into account the potential impact of inflation and taxes; these will always be there.

Identify your sources of income

Your next step is to assess how prepared you (or you and your spouse, if you're married) are. What sources of income will be available to you? Does your employer offer a traditional pension? You can likely count on Social Security to provide a portion of your retirement income. Other sources may include withdrawals from a 401(k) or other retirement plan, IRAs, annuities and other investments.

Transitioning into retirement

You'll need to carefully manage your assets so that your retirement savings will last.

  • Review your portfolio regularly. Traditional wisdom holds that retirees should value the safety of their principal above all else. For this reason, some people shift their investment portfolio to fixed-income investments, such as bonds and money market accounts, as they enter retirement. The problem with this approach is that you'll effectively lose purchasing power if the return on your investments doesn't keep up with inflation. While it generally makes sense for your portfolio to become more conservative as you grow older, it may be wise to consider maintaining at least a portion in growth investments.
  • Understand your retirement plan distribution options. Most pension plans pay benefits in the form of an annuity. If you're married, you generally must choose between a higher current retirement benefit that ends when you die or a smaller benefit that continues in whole or in part to the surviving spouse. A financial professional can help you with this difficult, but important, decision.
  • Consider which assets to use first. For many retirees, the answer is simple in theory: withdraw money from taxable accounts first, then tax-deferred accounts and lastly tax-free accounts. By using your tax-favored accounts last and avoiding taxes as long as possible, you'll keep more of your retirement dollars working for you. However, this approach isn't right for everyone. And don't forget to plan for required distributions. You must generally begin taking minimum distributions from employer qualified retirement plans and traditional IRAs when you reach age 73 (for those who reach age 72 after December 31, 2022), whether you need them or not. Managing your taxable income is important, and the mix of your withdrawals may vary from year to year because of this.

Unfortunately, there's no one-size-fits-all when it comes to retirement income planning. A financial professional like those with Busey Wealth Management can review your circumstances, help you sort through your options and help develop a plan that's right for you. To learn more about our holistic and tailored solutions, visit busey.com/wealth-management.


This is not intended to provide legal, tax or accounting advice. Any statement contained in this communication concerning U.S. tax matters is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties imposed on the relevant taxpayer. Clients should obtain their own independent tax advice based on their particular circumstances.

This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities.

This presentation is for general information purposes only. It does not take into account the particular investment objectives, restrictions, tax and financial situation or other needs of any specific client.

Investment products and services through Busey Wealth Management are:
Not FDIC INSURED | May lose value | No bank guarantee

Topics: Wealth, Retirement Planning

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