Will You Be Able to Afford to Retire?

Back to Work After 15 Years

Is the idea of retiring a fond dream or a recurring nightmare? Women are often afraid of not having enough money for a comfortable retirement -- and for good reason: We typically have shorter, spottier salary histories than men, and since we live at least five years longer on average, we often have more years of retirement to finance. Small wonder that 50 percent of women fear losing everything and becoming bag ladies, according to a 2006 study.

So what are we doing about it? Not enough. Although 93 percent of women say that saving for retirement is their primary investment goal, according to a 2005 survey by OppenheimerFunds, 47 percent are not even contributing to a retirement plan. But whether you're too busy, too intimidated, or just convinced that you've waited too long, take heart and take stock: It isn't too late. We've asked the experts for advice on typical midlife situations and what women can do to make their dream retirement a reality.

Diane, now 44, left her job as a sales representative 15 years ago when her son was born and continued to be a stay-at-home mom for his now-10-year-old twin sisters. She wants to go back to school to get her teaching certification. Her husband, Matthew, 55, makes a good living as a technological systems consultant but because he is self-employed, the family has to provide their own health insurance. Matthew has neither a 401(k) nor a pension and, owing to the money the couple puts into a 529 college savings account for the kids, they haven't saved anything for retirement.

From Kathleen Longo, a certified financial planner with Accredited Investors, in Edina, Minnesota:
When people go back to school in midlife, their households undergo a lot of change. Diane's family is relying on the salary she'll get down the road to cover their retirement savings but regardless of the expenses of Diane's education, they should start saving for retirement now, even if it means funneling the money they've been putting into their children's college funds into Roth IRAs instead. (Since he's over 50, Matthew can take advantage of catch-up provisions to sock away more than those under 50 are allowed to deposit.)

It's also crucial that Diane and Matthew examine their current finances and determine how they are going to pay for Diane's education. They might want to think about short-term borrowing with the intention of paying off the loan with Diane's first paychecks. Student loans are a possibility, as is asking their parents to lend them the money. Family loans can work well for both parties: A reasonable interest rate could be slightly more than the 5 percent return on a certificate of deposit and would still be less than the 8.25 percent typical of today's home equity loans.

Eventually, Diane will probably be eligible for healthcare benefits through her job, which may help cut down on the costs of their health insurance, and she'll probably have a disability insurance policy through her employer, too. Meanwhile, Matthew needs to make sure he has both disability and life insurance -- enough that if he's in a disabling or fatal car accident, the mortgage will be paid and Diane will be able to complete her certification. A short-term policy -- about 15 years, to ensure that there's enough money for the kids to finish college and for Diane to get established in her new career -- is the most affordable way to cover that possibility.

Once Diane starts working she should immediately begin maxing out her retirement plan options to make up for lost time, even if that means not adding to the kids' college savings accounts. You can always borrow money for education, but you can't borrow for retirement. Matthew and Diane may even need to tell their children that they may have to take out loans or work while in college. Later, when the situation improves, the parents can help pay off the children's loans -- a far better option than asking the kids to fund their retirement.