A week doesn’t go by without a new article or statistic about how Americans don’t have enough money saved for retirement. More recently, the Economic Policy Institute reported that the mean retirement savings for working households was $95,776 and the median is $5,000. This crisis affects the queer community as much as the straight community.
In its 2012 LGBT Financial Experience Study, Prudential reported that LGBT respondents about their most pressing financial concern, the most common response was "retirement." Somewhat disheartening, respondents to Prudential’s 2016-2017 LGBT Financial Experience Study were "less likely to have started saving or investing for retirement...than those surveyed in 2012."
Anecdotally, when queer people reach out to me or my business, it’s mostly those in their late 40s to mid-50s who fear they haven’t saved enough for retirement and they have fewer working years ahead of them than behind them.
Success is still within our reach, though. What can younger queer people do today to prepare for retirement with time on their side? What can older queer people do when they feel they’re in crunch mode? Here are five ideas.
Become debt free
The number two financial concern of the queer community is paying down debt. Debt anchors our future to our past, so don’t sacrifice tomorrow for today. Whether you need to pay off student loan debt, mortgage debt or credit card debt, make it a priority to be debt free as soon as possible but no later than retirement.
Many retirees today are finding it harder to survive on retirement savings and Social Security because they have too much debt. For example, 30 percent of Americans 65 and older had mortgage debt in 2011. In 2001, only 22 percent of Americans 65 and older had mortgage debt. There’s no data yet to confirm if that trend is continuing, but avoid being a part of that trend regardless. If you’re young with a low-interest mortgage, it may not make sense to pay off your debt instead of saving for retirement. But make it a point to have no mortgage debt by retirement.
Likewise, the Government Accountability Office reported in 2016 that Americans 50 years of age and older are having their Social Security checks garnished to repay long-held, defaulted student loans. Younger Americans are graduating with more student loan debt than ever before. To avoid sacrificing your future Social Security checks, make paying off your student loans a priority.
Have emergency savings
We’ve already written about the need for the queer community to have emergency savings, but it’s important enough to reinforce. Not surprisingly, the need for having an emergency savings account is often the third most pressing concern of queer respondents to financial surveys.
It’s hard to make progress towards life-expanding financial goals if even small emergencies could set you back. Plus, unlike our straight peers, queer people in many parts of the country have unique risks, such as possibly losing a job or being denied housing that could affect their financial goals.
Don’t worry about saving three to six months’ worth of living expenses all at once. Set up a plan to save this money over time. Often, an automated method works best.
Focus on your cash flow
Robert Kiyosaki, of Rich Dad/Poor Dad, has a definition of wealth that changed my life. He says wealth is when you have enough investment income to cover your expenses. The more investment income we have, the less earned income or employment income we need. There are three main ways to create and grow investment income.
First, there are paper assets, such as stocks, bonds, mutual funds, and exchange-traded funds. Second, there are investments in real estate, whether paper investments through real estate investment trusts and crowdfunded real estate investments, or physical properties. Then, there are personally owned businesses.
Todd Tresidder of The Financial Mentor believes that with this three-pronged cash flow approach, even queer people who have waited until their 40s or 50s to start preparing for retirement can adequately prepare for retirement and eliminate financial insecurity in their later years.
Maximize your Social Security benefits
Prudential’s 2012 study highlighted a different concern for the queer community, queer couples, and domestic partners. Before marriage equality, partners in same-sex relationships couldn’t receive Social Security benefits from each other. In June of 2015, that changed with marriage equality. However, even today, many male and female spouses don’t fully take advantage of the Social Security benefits due them.
The Spousal Benefit of Social Security gives pays the greater of 100% of yours or 50% your spouse’s earnings while they’re alive, as calculated by the current full retirement age of 62. Even if one spouse never worked a day in their life, they’re still owed Spousal Benefit payments. If one spouse worked more years or earned more money over their lifetime, the second spouse may benefit more from the first spouse’s Social Security contributions. The Spousal Benefit only kicks in, however, after a couple is married for 12 months.
The Survivor Benefit of Social Security pays the greater of 100% of yours or 100% of your spouse’s earnings if they pass away. As with the Spousal Benefit, the surviving spouse qualifies for the Survivor Benefit whether they worked a day in their life. The Survivor Benefit only kicks in, however, after a couple has been married for nine months.
Many same-sex couples, especially older ones, haven’t gotten married because it wasn’t an option they thought they’d have and they’re comfortable with how life is today. Couples should do what’s right for them, but these benefits should make your reconsider marriage. As this story shows, getting married sooner rather than later may be best.
Include Spousal and Survivor Benefits in your financial planning. You’ll learn what you would be owed to help with your marriage and financial planning by creating an account with the Social Security Administration here.
Hire a financial planner
If you don’t have a financial planner, you need one. Prudential’s 2026-2017 study showed that fewer queer people use a financial planner than the general population. However, an HSBC study showed that individuals with a financial planner have nearly 29% more in retirement income wealth than those who don’t have one. HSBC’s findings support Prudential’s findings that queer people who use a financial planner tend to be more affluent.
To be sure, merely having a financial planner won’t make you rich and going it alone may be daunting. But, not having a financial plan may cost you tens of thousands over your lifetime. A 2012 CFP (Certified Financial Planners™) Board study showed that "the more extensively households plan, the better prepared they are financially in terms of their likelihood of saving, investing, and managing credit card debt."
A financial planner will look at your partner’s and your financial lives in totality to make sure you’re on target to meet your short-term and long-term financial goals. They’ll ensure you have all the financial products you need, such as health insurance, wills, and beneficiaries. They’ll guide you through changing your investments as your needs and circumstances change. So, the 1% fee they’ll charge will likely give you 100% peace of mind, and you can’t put a value on that.
People, queer and straight, are usually too busy or too afraid to tend to their financial needs but not doing so is a recipe for disaster. Once a financial plan is put into place, minimal attention a couple of times a year after that is necessary to ensure your financial plan stays on track. As for fear, "We have nothing to fear but fear itself" and "hope is not a strategy." So, take the time and face your fears and you’ll have the peace of mind you want.