Unfortunately, it’s not uncommon to see women in their 60s, 70s or 80s still working, unable to retire on their savings and Social Security benefits.
On average, women earn less than men and consequently have less savings and smaller Social Security checks. Indeed, a study by the National Institute on Retirement Security found that for woman aged 65 and older, the average income was 25% lower than that for men. Adding to the burden is that women live longer, so fewer resources typically must last for a longer period of time.
What this means is that women need to build up assets and create their own pensions. That’s hardly as easy as it sounds, particularly since female investors often tend to be more risk averse than their male counterparts. Extremely safe investments tend to offer low returns. But there is one low-risk instrument that’s often overlooked.
Fixed-rate annuities are low risk but can build wealth faster than other investments of similar risk levels. They behave a lot like CDs, paying a set interest rate for a fixed number of years. They’re guaranteed by the insurance company that issues them, and there are further backstops from state guaranty associations. The two key advantages include tax deferral and higher rates than CDs or Treasuries. Fixed annuities are excellent supplements for IRAs and 401(k)s, as they can be annuitized during retirement to convert into a guaranteed stream of income for life, paid on a monthly basis, until the owner dies.
Another choice is to use funds to purchase a deferred lifetime income annuity now. The buyer deposits money with an insurance company and they will pay a lifetime stream of income starting on some specified future date. The further out that date is, the larger the payments will be. For investors who need income now, it’s possible to purchase an immediate lifetime income annuity.
A number of economists recommend that women and men alike invest significant assets in lifetime income annuities since they offer insurance against the risk of living to a very old age and out-living
To learn more about annuities and how they can help to assure a secure retirement, please see:
Why Annuities Could Be an Especially Good Deal for Women | Kiplingers