A recent study by the Transamerica Center for Retirement Studies highlights some sobering facts about women and retirement. While women generally live longer than men, the average woman only has $34,000 in retirement savings, and most women don't have a backup plan for retirement.
Only 10% of women feel confident about retirement. Add this to the fact that the unemployment rate for military spouses, the majority of whom are women, is at least 4x higher than the national average, so military spouses in their prime working years are contributing less to their retirement than their civilian counterparts.
Another issue is that many military spouses do not realize that retired pay stops when a servicemember dies unless the military member opted to pay for the Survivor Benefit Plan. And even if a servicemember opted to pay premiums for the highest level of benefits for the SBP, the widow/widower will only receive 55% of retired base pay.
So what can military spouses do to ensure that they, like their active duty spouses, are moving in the right direction for retirement?
For those spouses who do work, they should try to contribute to an employer-sponsored pension plan if they are eligible for it. Even if the active duty member is saving through the Thrift Savings Plan, the working military spouse should have retirement savings in his or her own right, especially if there is an employer match on contributions.
Non-working military spouses are eligible to set up Individual Retirement Accounts in their own names, even if they do not have earned income. This can be a great way for stay at home spouses to start accumulating retirement savings. Spouses can contribute to either a ROTH or a Traditional IRA (servicemembers may also be eligible to contribute to either type of IRA, even if they contribute to the TSP).
Whether a military family is saving for an emergency or saving for retirement, the key to success lies in making automatic contributions. Even if a family can only afford to put $25 per month into a spousal IRA, it is a start. Contributions can always be increased at a later time. Even if an IRA cannot be fully funded each year, it is well worth it to have some sort of retirement savings vehicle in place.
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by Lila Quintiliani, AFC®
Military Saves Program Manager
*This is a revised version of an earlier article that was originally published in May 2013