Retiring Women

Recently, MetLife published a study called "It's Not Your Mother's Retirement," which concluded that young women are almost twice as likely as their mothers to carry $25,000 or more in consumer debt, and some have resigned themselves to never retiring.

When it comes to retirement planning and security, our experiences are likely to be vastly different from the experiences of our mothers. Take a look at what the survey revealed:

Your mother most likely:

• Received a spousal Social Security benefit based on her husband's work history.
• Didn't have to save much or know about investing since pension and Social Security benefits didn't require it.
• Generally deferred to her spouse about family financial decisions.

You most likely:

• Will receive a Social Security benefit based on your own work history or you will receive a Civil Service Retirement System benefit instead of your spouse's Social Security.
• Need to save a lot and understand investing to be able to afford retirement, because Social Security alone may not be enough to live on.
• Enjoy more equality with your partner with respect to financial decisions.

Today's women are redefining retirement, with plans to work outside the home longer than their mothers, and to actively pursue such interests as travel, volunteerism and higher education. That requires a different kind of retirement planning. After the study was published, the MetLife Mature Market Institute issued a booklet, "What Today's Woman Needs to Know," providing guidance on how to take advantage of the opportunities -- and rise to the challenges -- our mothers never had.

Women today are likely to live longer than their mothers, meaning that their retirement will cost more. Luckily, federal retirement benefits and Social Security benefits for those who are eligible to receive them will last for life. But women also need to learn how to manage their retirement savings. And the earlier you start saving and planning, the easier it will be to reach your goals. Listed below are some retirement planning and savings suggestions based on your age -- and by the way, many of them are not limited to women. In Your 20s

• Check out the benefits that come with your federal job. In addition to your salary, remember there's the 401(k)-style Thrift Savings Plan, basic retirement benefits, the Federal Employees Health Benefits Program, sick and annual leave and other insurance - long-term care, dental, vision, flexible spending accounts and health care savings accounts. You may be surprised at just how valuable these benefits are when you add them up. Most private sector employers no longer offer a defined benefit pension, but even recently hired federal employees have the Federal Employees Retirement System basic benefit. You are vested after five years of civilian service.
• Get into the habit of saving. Open a checking and savings account if you don't have them. Deposit 5 percent of your salary into your savings account each pay period. Start an emergency fund. You should have three to six months' worth of pay saved up in case you run into financial surprises -- a job loss or expensive car repairs, for example.
• Start putting away money for retirement. Contribute at least 5 percent of your salary to your TSP account, so you get the full agency match on your savings. Unless you choose otherwise, your savings automatically will be invested in the government securities G Fund; learn more about the other funds and consider the lifecycle 2040 fund for "hands-off" investing for your retirement.
• Strive for a debt-free life. While you need credit to build up a credit history, don't go overboard. Limit yourself to one credit card, and pay the balance each month. If you have already piled up credit card debt, put as much money toward it as you can to pay it down as quickly as possible. Also, work on paying down any student loan debt you have, and consider how to pay for additional education if you choose to pursue it. By investing in the TSP, you can use your savings to pay off your student loans or to come up with a down payment for your first house. When paying back a TSP loan, you pay yourself back the interest and the unpaid balance on the loan. By investing in the TSP, you will get matching contributions even if you have to borrow from your savings later.

In Your 30s

• Keep saving, and focus more on the investing part. Continue contributing to your TSP. Shoot for 10 percent of your paycheck (especially if you've borrowed from your TSP or haven't contributed at least 5 percent in your 20s). Take a look at how your TSP money is invested. At your age, you can afford to put a lot of your money in stocks. If you're not sure what to do, consider the L2040 or L2030 fund, which will automatically invest your savings in a mix of stock and other funds.
• Keep your debt in control. If you're buying a home, aim for a 20 percent down payment to avoid the cost of mortgage insurance. Your mortgage payment should be no more than 28 percent of your monthly income (based on lender guidelines).
• Do an insurance checkup. If you've started a family, buy term life insurance that will protect them financially if you die. Compare the price of Federal Employees Group Life Insurance to other insurance you can purchase. FEGLI covers everyone during an open enrollment or after a life event, regardless of their health, while private policies have medical underwriting. Because of this, outside policies may offer better rates. You are covered for disability by your sick leave and by disability retirement. Try to keep a minimum of three to six months of sick leave in your account in the event of an illness or accident. If you have to apply for disability retirement, you can expect a replacement of income of about 40 percent, plus a little more if you also qualify for Social Security disability. Also, make sure you are carrying enough car and homeowner's insurance. You often can get a good deal if you use the same insurance company for both. If you rent, make sure to get renters insurance to cover your losses in the event of theft, a fire or other disaster. Take advantage of Internet tools to shop for the best insurance coverage and rates.

In Your 40s

• Refine your retirement saving strategy. Set a specific retirement savings goal. Use the TSP's online calculators. There's one for projecting your account balance and another for retirement planning. Take a look at how your TSP money is invested. You are still young enough to keep a chunk of money in the C, S and I stock funds. Don't be afraid to ask for help. A good financial planning professional can set and keep you on track to meet your goals. For help selecting an adviser, read this fact sheet on the subject published by the Women's Institute for a Secure Retirement.

In Your 50s

• Revisit your goals. Make sure your retirement savings goal still makes sense and that you are on track to reach it.
• Increase your savings. If you're behind on saving, take advantage of higher contribution limits in the TSP that are now available to you. Employees age 50 and older may make an additional $5,000 in catch-up contributions in addition to the IRS tax deferral limit of $15,500 for 2007.
• Keep your money in stocks. Take a look at how your TSP money is invested. You can still afford to have a lot of your money in the C, S and I Funds.
• Think about adding more insurance. Explore the Federal Long-Term Care Insurance Program; generally, the younger you are when you sign up, the lower the premiums will be.
• Estimate your retirement. Ask for a retirement estimate from your human resources office, and about retirement planning seminars you might attend. Set a projected retirement date. If you have planned well and have had no unexpected surprises (such as divorce, death of a spouse or health problems), you may be able to retire in your 50s.

In Your 60s

• Consider your retirement spending strategy. Determine whether to keep your money in the TSP after you retire, annuitize a portion of it to provide a lifetime stream of income, or a combination of both. At retirement, you can choose to keep your money in the TSP or transfer your balance to an Individual Retirement Account to retain the tax benefits. You may access money in an IRA as needed if you do not need a steady stream of monthly income.
• Apply for your retirement. About 30 to90 days before your retirement date, submit your application to your agency human resources office. If you are eligible, apply for Social Security retirement as well by contacting Social Security at 1-800-772-1213 or www.ssa.gov.
• Consider your health. Apply for Medicare three months before you turn 65 by contacting Social Security. Since your federal health plan has good prescription benefits, you will not need Medicare Part D. Likewise, your FEHBP will provide an excellent supplement to Medicare so you will not need Medicare Part C or any additional Medicare supplement. If you are a military retiree and will be using Tricare For Life or if you choose to try out a Medicare Part C plan, you will be able to suspend your FEHBP coverage in retirement while you are using these other plans.
• Assess your options if you can't afford to retire. Consider continuing to work on a full or reduced schedule. Find out when you can receive your full Social Security benefit (it will be between 65 and 67, depending on your year of birth). Reduced benefits are payable as early as age 62. You can hold off on collecting your benefit up to age 70 to increase your monthly payment. Consider how the timing of your retirement will affect your Social Security benefits. You may be eligible for your own "retired worker" benefit based on your work history, or if you're married, a "spousal benefit" based on your husband's work history. The longer you wait to begin receiving benefits (up to age 70), the higher your monthly benefit will be. This may be an important consideration if Social Security will make up a significant percentage of your post-retirement income. If you are covered by CSRS, don't count on much Social Security from your own employment record or from your spouse. (See my June 9, 2006, and Sept. 6, 2006, columns for an explanation of why this is the case.

In Your 70s

• Look at IRA and TSP distributions. If you have a traditional IRA that you haven't taken withdrawals from yet, the law requires that you must start taking money out after age 70 1/2. If you are retired from federal service, you will also need to take a required minimum distribution from your TSP. Otherwise you may get hit with a big tax penalty. Start collecting Social Security at age 70 if you have delayed your benefit.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.