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May 29, 2014

Planning for retirement: What women should consider


“Retirement is the most important thing we are going to save for in our lifetime,” TIAA-CREF Financial Services expert Linda G. Pasquini told an audience of more than 100 women at a recent workshop at the University Club.

Pasquini, director of TIAA-CREF’s field consulting group in Pittsburgh, led the May 21 Woman to Woman Financial Empowerment Series workshop, “Postcards From the Future: A Woman’s Guide to Financially Ever After,” co-sponsored by the Provost’s Advisory Committee on Women’s Concerns.

When it comes to saving for retirement, women face some unique challenges that make careful planning even more crucial, she said.

Women tend to live longer — on average, three years longer than men — so women’s retirement savings need to stretch further, she said. Women also tend to have fewer working years to save for retirement. Caregiving — for elderly parents or for raising children — takes women out of the workforce for an average of 12 years.

“Time is what grows money,” Pasquini said, noting that women may not only miss out on the benefit of having their retirement savings increase over time, but they also miss out on the additional contribution from an employer match during the years they spend out of the workforce.

And lower pay may prevent women from being able to save as much for retirement as men. “Today still women earn 77 cents for every dollar men make doing the same job,” Pasquini said, adding that women also tend to work in lower-paying career fields. Two out of three women earn less than $30,000 a year, and 90 percent of working women earn less than $50,000 a year, she said.

“So, the money we do save, we’ve got to be really smart about how we invest it,” Pasquini said.

“If we’re lucky we’ll spend 25 years, maybe more, in retirement. …That is a long time to be miserable and poor,” she said, urging women to review whether they are on track to fund the retirement lifestyle they envision.

Envision your retirement

“Statistics show that only 8 percent of women are very confident that they’re on track to meet their retirement goal,” Pasquini said. “I would argue that some of that is because we haven’t always taken time to think about what retirement is going to look like. … Part of being confident of having enough is having a plan,” she said.

“We’re not all going to live retirement in the same way,” she said. “It’s not going to cost us all the same to have the kind of retirement we want to have.”

Some women envision traveling; others plan to spend retirement enjoying their grandchildren. Others want to pursue hobbies or spend time volunteering.

“We need to understand what retirement’s going to be before we can know what it’s going to cost,” she said.

Pasquini urged women to ponder their retirement goals and, using their current salary as a reference, determine in relative terms whether their plans will cost more or less than their current lifestyle.

As a general rule of thumb, the plan should aim to replace about 80 percent of your income in retirement. “But you may need more or less to support your lifestyle in retirement,” she said.

For example, if world travel is the plan, ask yourself: “If I retire and have 100 percent of my income, would that pay for my lifestyle?”

Get organized

Once you know where you’re heading, get organized, she said, noting that has a 360-degree financial view tool that can help.

Organize your financial records, check your credit rating, be sure your end-of-life planning is up-to-date, and review your cash flow and net worth, she advised.

Cash flow — what money is coming in and what’s going out every month — is important to review. If you find you’re not on track to meet your retirement goals, it can show where some savings might be found: less frequent visits to the nail salon or Starbucks, or a more modest cable package, Pasquini said.

Knowing your net worth — everything you own compared with what you owe — is important to track as well.

“Ideally you want the things you own to be greater than the things you owe — a positive net worth. The way you know if you’re making progress is from year to year the net worth is increasing,” she said.

On track or not?

Am I saving enough? Am I investing wisely? When can I retire?

These questions need to be answered in order to be confident about your ability to retire comfortably, she said.

Customizable retirement calculators are available at, but as a quick guide, a woman who is 20 years from retirement should have 4.5 times her current salary in retirement savings in order to replace 80 percent of her income at retirement. At 10 years from retirement, she should have 6.6 times her salary saved.

The guide assumes 4 percent annual salary growth, 10 percent annual contributions and Social Security equal to 20 percent of preretirement income.

Pasquini noted that 4 percent raises aren’t a given, but added that the 10 percent annual contribution assumption is low for Pitt employees who are vested and getting a 12 percent employer match on their maximum 8 percent retirement contribution.

If you’re not on track, there are options, she said.

One is to work longer — not necessarily at a stressful, full-time job. Another is to live on less.

However, Pasquini said, both those options are reactionary. “We don’t want to start out with a plan to be scrimping by in retirement,” she said.

Better options are to save more, or change to a more aggressive investment mix to chase a higher return, Pasquini said.

Women tend to be more conservative in their investments. “That’s a luxury we maybe don’t have. But as you near retirement, it’s the wrong time to get reckless. You want to find a balance in the investment mix to make it productive,” she cautioned.

Saving more

“The easiest place to save more is in the employer plan,” Pasquini said.

She noted that Pitt offers both a defined benefit (pension) plan and a defined contribution plan.

The defined benefit plan is “very conservative,” and is the default for employees who do not elect the defined contribution plan.

There is a once in a career opportunity to change to the defined contribution plan, “although it may not be the right choice for everyone,” she said.

The defined contribution plan includes a dollar-for-dollar employer match for employees who contribute 3-8 percent of their pay; after the employee is vested, the University match is $1.50 for every dollar.

In addition, there is an accelerated option available after age 52 in which, instead of the maximum 12 percent match, the University will contribute 14.5 percent, but only until age 65 or for a maximum of 10 years, after which the University match is zero.

For employees who are certain they will retire before age 65, the accelerated option is an opportunity to gain an extra 2.5 percent match, while those who are not sure or who intend to work longer may find it better to simply remain at the 12 percent match, she said.


Individual retirement accounts (IRAs) unrelated to employer plans are another option, although Pasquini cautioned that the IRA is merely the “bucket” and that women should look closely at the investments within the IRA. “Make sure they’re working for you,” she said, noting that interest rates on CDs and money market accounts currently are low.


Women also should check their Social Security estimates, available online, to aid their planning.

Although there is an option to retire earlier at a reduced benefit, women need to consider whether they can afford to do so.

Pasquini noted that divorced women who were married for 10 years or more may be entitled to benefits based on their ex-husband’s earnings, if his were higher.

Investment allocations

Women can’t afford to simply put their money under the mattress; their savings need to grow to counteract inflation.

Investment portfolios may include investments in a variety of asset classes: guaranteed assets, real estate, fixed income securities (bonds), low-risk holdings such as money markets, and equities (stocks).

While stocks are the best performing asset class over time, holdings need to be balanced. “We can’t afford to place all the eggs in the stock basket,” she said. Bonds, which typically perform when stocks don’t, can provide a balance.

“In theory the further you are from when you are going to need the money, the more aggressive you can be,” she said.

Younger investors have time to weather stocks’ price swings and therefore, in theory, can tolerate more aggressive allocations more heavily invested in stocks. Conversely, “When you’re closer to retirement you’re moving toward a more conservative mix,” she said.

Investors who are ahead on their retirement savings likewise may be able to tolerate higher risk, she said. “Don’t bet the grocery money,” she said. “We’ve got to try and grow it, but you can’t take risks you can’t recover from.”


While life insurance and disability insurance are part of the University employment benefits, consider whether the amounts are sufficient. “You may need supplemental insurance,” she said.

Likewise, long-term care insurance is expensive, but needs to be considered. “Can you afford to be without it?” she said.

“Nobody ever envisions their retirement in a nursing home,” Pasquini said, noting that nursing home costs can quickly eat up retirement savings.

“Make an informed decision. Get a quote, then make the decision,” she advised.

Personalized planning

Appointments can be scheduled to meet with a TIAA-CREF consultant on campus by calling 412/365-3000 or visiting

Pasquini advised those nearing their retirement date should meet with a TIAA-CREF representative at least a year in advance.


Vanguard also offers personal appointments. To schedule a meeting, call 800/662-0106 ext. 14500 or visit

—Kimberly K. Barlow