March is Women’s History Month. Women often face bigger retirement planning issues than men. There are several reasons for this.

Many women have had to deal with glass ceilings that have unfairly limited their opportunities for job promotion. Also, much has been written about women getting paid less than men for doing the same job. These two factors mean their lifetime earnings often are lower than men.

And because women sometimes serve as a caregiver to their children, or parents, they may have fewer years of earnings.

Women sometimes marry men who are a few years older. This, combined with women having longer average life expectancies of four to six years, means they may live in a single-income household for more years than men.

This also means they probably will spend more on health-care expenses than men and are more likely to need long-term care than their spouses. Often, when husbands need this assistance, their wives are available to help. When women need help, a number of them are widowed.

Upon the first death of a spouse, household income almost always goes down. One Social Security check will disappear and maybe half of the pension. Expenses do not go down very much, only the food and personal expenditures of the deceased. Property taxes, utility cost and home repairs stay the same whether there are one or two individuals living in the home.

One thing that goes up dramatically is income taxes. A middle-income couple, both over 65 and earning $60,000 per year, could see the tax bill go up as much as 442%.

In this example, we are assuming that half of the income is coming from Social Security and the other half is coming from 401(k) withdrawals. If one spouse was receiving $20,000 per year from Social Security and the other $10,000, upon the first death the $10,000 check would disappear. SS is gender neutral, so it would be the same no matter which spouse died.

The surviving spouse would need to take an extra $10,000 out of qualified funds to make up for the lost SS check, because expenses went down so little. The federal tax due would increase from $988 to $5,357. This is an increase of 442%.

This is known as the widows’ penalty. This same phenomenon happens anytime someone moves from married filing jointly to filing single. This would include changing marital status due to a divorce.

This is a result of getting less free money from personal deductions and you reaching higher tax rates sooner, because each one is almost half the size. Talk to your tax adviser about this situation.

Everyone needs a written financial plan to maximize enjoyment during retirement. It all starts with income planning. Reduce your debts, increase emergency money and truly understand your financial condition. Live within your means. Be prepared and start saving earlier. These are the basic steps to retirement planning.

Remember, for many women and others, this may last 20 years or longer.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.

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