Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Financially Independent Women

According to the Census Bureau, 43 percent of all U.S. residents 15 and older are unmarried. More than half of the singles are women. Nationwide, there are 86 unmarried men for every 100 unmarried women. AARP says there are several reasons for this: Not only is the divorce rate high, but American women tend to marry later and, not to put too fine a point on it, many of them outlive their husbands.

Single women who attend my retirement planning seminars often ask for specific advice for people like them. This week I'd like to offer some.

Managing Money

If you are the sole provider for yourself, it's that much more important to make sure you'll have enough retirement income to cover your expenses. Research has shown that women-married and single-are less likely to accept risk in their investments and are less knowledgeable about investing than men. In a recent OppenheimerFunds survey, 63 percent of women admitted they didn't know how a mutual fund worked. Only 41 percent of men said they didn't.

One way to make sure you have enough money for the future is to start saving early. Here's how much you'd have to save every month to have $100,000 in five years:

  • $1,433 per month at 6 percent interest
  • $1,469 per month at 5 percent interest

That's around $17,000 a year. Luckily, the Internal Revenue Service's tax deferral limit for contributions to the Thrift Savings Plan for 2010 is $16,500, so you can work toward your savings goal within the TSP. Putting away $16,500 per year with pretax dollars would save you approximately $5,000 in taxes. The net difference in your take-home pay would be about $11,500 a year, or $958 a month. That's a lot better than $1,400 a month.

If you're 50 or older this year, you can add an additional $5,500 to your TSP account in catch-up contributions. And if you're under the Federal Employees Retirement System, you'll get 5 percent automatic matching contributions from your agency.

Is it realistic to expect to earn a 5 percent to 6 percent return on your investments? Not if you keep your money under your mattress or in a savings account. But if you diversify your investments among the TSP's options, it's not an unreasonable goal. The key is to balance the risk by diversifying between safe and more aggressive investments. If you are not comfortable doing this yourself, I suggest using the TSP's life-cycle funds, which automatically balance your investments depending on what stage you are in your career.

Social Security See-Saw

If you aren't able to save a lot and still meet your living expenses, then keep in mind that Social Security benefits are on a see-saw with your retirement savings. This means if you work at a lower salary, you will have more of your income replaced by Social Security and you won't need to save as much to make ends meet. If you are at the higher end of the pay scale, however, you'll have to save more because Social Security won't replace as much of your income.

But either way, you'll need more than just Social Security to have a comfortable retirement. Social Security replaces about 40 percent of an average wage earner's income after retiring, and most financial advisers say retirees will need 70 percent or more of preretirement earnings to live comfortably. If you're widowed or divorced, you might get higher Social Security benefits based on what your former or deceased spouse was entitled to receive. There's more information in a Social Security fact sheet, "What Every Woman Should Know."

Retirees covered under the Civil Service Retirement System who are divorced or widowed might not be able to receive a Social Security benefit based on their former or deceased spouse's work record due to the Government Pension Offset. This can come as a devastating surprise if you aren't aware of it in time to prepare. Here's a fact sheet with more information.

Basic Benefits

If you're covered under CSRS and don't pay Social Security taxes, then you'll need about 30 years of service to receive a benefit that is a little more than 56 percent of your high-three average salary. A 37-year CSRS career will provide a 70 percent replacement of the high-three. When you consider how much lower the withholdings are from a retirement check than a regular paycheck, this benefit alone might provide a financially comfortable retirement. In addition, if you don't need to have money deducted from your retirement benefit to provide a survivor's annuity, your check will be that much bigger.

FERS employees also have a basic retirement benefit, but it is designed to serve as a base for Social Security and TSP savings. The FERS basic benefit provides about half the benefit as CSRS for the same years of service. For example, 30 years under FERS will get you about 30 percent of your high-three average salary (33 percent if you're 62 or older). You can choose to get a benefit payable only during your lifetime, with no reduction to provide a survivor's annuity. When added to a Social Security benefit and investment income from your savings, this can be enough to enjoy a long, financially secure retirement.

Health Concerns

In addition to having enough money for retirement, you have to think about what happens in the event you become ill or need a caregiver. It goes without saying that quality health insurance is important. Luckily, federal employees and retirees have many good plans to choose from in the Federal Employees Health Benefits Program. Self-only premiums are usually less than half the cost of self-and-family coverage.

Then there's the issue of life insurance. Most people carry such insurance to protect family members who are financially dependent on them. If you don't support anyone financially, then carry only enough life insurance to cover the cost of your final expenses.

You might want to examine how much you currently spend on life insurance premiums and consider the possibility of reducing your coverage to free up money to buy long-term care insurance. This provides a resource to pay for a caregiver should you need personal care due to an illness or injury. You can see how much long-term care insurance would cost by using this online calculator.

Beneficiary Designations

Single people generally do not opt to provide survivor benefits from their FERS or CSRS retirements, but it is important to designate beneficiaries for your other federal benefits. Having valid beneficiary designations on file will make your wishes clear and also make it easier for your beneficiaries to claim the benefits they're entitled to.

Here are links to some important beneficiary designation forms:

This column was directed at women, but much of this information applies to men, too. If you're under 45 years old, you have a great opportunity to plan now for a comfortable retirement. If you're a little older, you might need to consider working a few years longer than you had planned. This will allow you to make some adjustments to your retirement income that can afford you a more financially secure future.

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.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on or on WFED AM 1500 in the Washington metro area.


Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement and the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on

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