Retirement Start Where You Are: Retirement Planning for LGBTQ+ Folks

by Daniella Flores | June 27, 2022

If you could fast forward to your retirement years, what scenario do you see?

Do you envision yourself traveling to far-flung places or taking up a new hobby? These seem like lovely projections, but many find a plan in place will help make it happen so you can live comfortably and securely.

Of course, that planning is easier said than done. In part, because the long-term budgeting required for retirement often gets pushed to the back burner for in-the-now needs and goals.

Add to that, LGBTQ+ individuals, partners and families in particular often experience challenges that can affect their finances both while looking ahead towards retirement and once they reach their golden years (according to the U.S. Census Bureau retirement age is 64 on average).

One reason for this? A wage gap among LGBTQ+ workers. According to Experian's 2018 LGBTQ Money Survey: Attitudes, Challenges and Opportunities 62% of LGBTQ+ respondents indicated they had experienced financial issues because of their sexual orientation or gender identity.

LGBTQ+ workers earn less than their cisgender, heterosexual counterparts, earning about 90 cents for every dollar, according to an analysis by the Human Rights Campaign Foundation. LGBTQ+ people of color, transgender and non-binary folks earn even less, with transgender women earning just 60 cents for every dollar the typical worker earns.

While equal rights progress has been made by the LGBTQ+ community, LGBTQ+ folks along with their partners and families may struggle to find financial guidance that addresses their particular needs. Issues such as housing discrimination when purchasing a home, credit issues following a name change, family planning expenses or healthcare costs for gender affirming surgeries or hormone therapy.

However, it’s possible to address the particular financial needs of today and still plan to have savings waiting for you in the future. Following are some tips from LGBTQ+ educators and financial planners to help tackle these concerns and effectively plan by investing — and taking action — towards the retirement you envision.

What does it mean to save for retirement?

If your goal is to retire with some financial security, creating a plan is designed to help do just that. Which means not just saving money, but also investing it to prepare for that future life stage.

Just as there are many golden-years scenarios, there are also options when it comes to investing for retirement. You could contribute money to a retirement plan sponsored by your employer, such as a 401(k) or 403(b) plans, and/or save by using an Individual Retirement Account (IRA).

The upside of such accounts is that they offer tax-advantages. Over time, as you continue to invest month over month, those investments can potentially compound and grow to become savings you can live off of.

But how much do you need to support this future lifestyle? To determine what you’ll need for retirement, use the 25x rule coined by William Bengen. The 25x rule gives you a baseline of what you should save for retirement by taking your annual living expenses and multiplying them by 25. This isn’t the exact number you should go by, as your expenses may be more or less depending on your life situation, but it’s a great starting point.

To further help calculate how much you’ll need by retirement, the Investor.gov’s compound calculator is a useful tool to help gauge how much you’ll need to save and invest to reach your goal.

Two retired men laugh together at a cafe

How to start investing for retirement at various life stages

When you start investing for retirement, try to visualize the future. Will you be sipping drinks on a remote beach somewhere? At what age would you like to retire? Will you be single or with a partner? How much money will you need to support your lifestyle?

These may seem like simple questions, but many LGBTQ+ individuals, partners and families struggle to find financial guidance that is empathetic to the LGBTQ+ community and their experience.

Consider that the right to legal marriage and protection from workplace discrimination — both which inform personal and financial futures — were not shared by the LGBTQ+ community. The potential tax benefits of filing jointly when married (possibility of a lower tax bracket together or of greater charitable donation deductions), or healthcare advantages (say, if a company plan extends spousal health care) were only legally granted to same-sex couples in the U.S. in 2015. And, it wasn’t until 2020 that the Supreme Court ruled that firing someone for their sexual orientation or gender identity violates federal law.

Given this history, it’s understandable why retirement saving and planning can seem even more overwhelming for LGBTQ+ individuals and partners. However, it’s important to start exploring these questions, because they will help determine how much money you’ll need when you retire as well as certain tax advantages that can help offset that cost.

Instead of planning it all at once, approach retirement savings goals by working from whatever stage of life you’re in. Following are three key stages in a person’s professional life when they are earning income and how to put some of that towards savings at every point.

Stage 1: The graduate

As you’re leaving school and starting out on your career path, make a plan for your money as soon as possible.

Your needs might differ from your heterosexual counterparts. You might be looking to start a career in a place with a larger LGBTQ+ community, and it takes some financial planning to relocate. If you're trans, you may be considering a name change, hormone therapy, gender affirming procedures, as well as looking into the legal and financial costs of those decisions. 

So, how does someone even start to build up savings while considering these decisions?

Rita-Soledad Fernández Paulino, a financial educator for women, BIPOC and LGBTQ+ communities and founder of Wealth Para Todos LLC, recommends getting intentional with all of the money that comes your way.

“Build the habit of creating a spending plan for each paycheck. Make sure you are saving an emergency fund in a high-yield savings account and make a plan to eliminate your high-interest debt,” Fernández Paulino says.

Fernández Paulino also notes that when evaluating a prospective employer, look beyond a paycheck to help augment your savings potential. “As you go on interviews, make sure to ask about health insurance benefits and employer retirement accounts. Ideally, start investing in an employer-sponsored retirement plan like a 401(k) or an IRA as soon as you have earned income,” she says. 

To build up a solid foundation of saving and starting to invest, follow these five steps: 

1. Save up a starter emergency fund of living expenses for 1 to 3 months. Ideally, you will want to aim for an emergency fund of living expenses for 3 to 6 months, but this is something you can build up to over time.

2. Don’t wait to invest. Even if you’re paying off student loans, you can still get started investing $15, $25, or $50 every month. The most important thing is to start this good habit early on in your career.

3. If you have any high-interest debt like credit card debt, prioritize paying that off first while setting aside a small amount for investing.

4. If your employer offers a retirement plan (a 401(k) or 403(b) retirement plan), opt for at least the match (if an employer matches 401(k) contributions) and slowly raise by 1% over time as you become more comfortable, get raises, bonuses, etc.

5. In addition to an employer-sponsored plan, an IRA is another tax-deferred or tax-free investing account to consider. If you don’t have access to a 401(k) or a 403(b), consider opening a Traditional or Roth IRA. If you’re self-employed, you can also invest using a Solo 401(k) or SEP IRA.

 

Stage 2: The builder

At this stage of your life you may have explored your career or could be pivoting into a new field of work. Perhaps you’re buying a home, marrying a partner or starting a family. Retirement point is about 20 years in the future.

This is the stage where my wife and I are currently, and we still face discrimination which can lead to setbacks in reaching our goals. We recently relocated and were in the process of buying a home together. One of the hardest lessons we learned was that finding the right broker for us was just as important as finding the right home.

We initially connected with a broker who assumed we were sisters — even after we introduced ourselves as a married couple — and was dismissive of us. This person was uncomfortable with our situation, so we decided not to work with them, and instead shopped around for a broker who was accepting of us and understood the vision we had for our new house. It was an unexpected delay, but it didn’t deter us from our dream of buying a home. 

David Auten and John Schneider, creators of the Queer Money podcast urge you to check in with your dreams. “What most folks don’t consider is that the foundation of financial planning and investing is based on dreams. It’s based on what your most ideal life looks like, the goals and dreams you want to reach. Shed any expectations that have been projected on you since before you were even born, remove any expectations that your friends, family and society have on what “happiness” looks like for you and get intimate with what you truly want.” Auten says.

If you are a little later in the game with investing, you can still invest now and plan to retire when you want. One was to try to make up for lost time is to increase how much you set aside for retirement contributions to get to your goal in 20 years. “Let’s be honest, it’s hard to plan 20 or more years out. Retirement in 20, 30, or 40 years always seems far away until it’s not,” Schneider says.

Carmen Perez, founder of Make Real Cents says that at this middle stage of life to plan for your dreams. “There are so many things to plan for between now and retirement. Things like getting married, owning a home, planning for a family and debt are all things that should be considered. My wife and I paid for our wedding in cash, had to come up with a down payment for our home, bought a car, are planning for a family and it all costs more than we expected,” Perez shares.

“While you have the time to think about it, you probably also have the time to plan for it. Be thoughtful in what you want to do in the future, then add 15% because it will likely cost you more than you think,” says Perez.

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If you are a little later in the game with investing, you can still invest now and retire when you want.
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Stage 3: The homestretch 

This is when you will need to think about factors such as the rising costs of things like healthcare. According to research from the Movement Advancement Project, currently only 16 states, the District of Columbia, and Puerto Rico prohibit private health insurance discrimination based on gender identity and sexual orientation.

Other things to think about include the cost of living if you want to move to an area with a larger LGBTQ+ presence and more protections for LGBTQ+ folks, long-term care costs and how inflation might affect your savings as you age.

“If you plan to retire in the next 10 years, you need to start thinking about problems that will arise immediately when you retire,” says Lauren Boland, creator of the popular retirement calculator cFIREsim.

“Do you know where you’ll live? Do you have a plan for healthcare? Are you under 59.5 years old and need to figure out how to withdraw money from pre-tax accounts like a 401(k) or IRA? All of those questions have financial implications that you can plan for in advance. Keep your eye on the prize but keep re-evaluating these goals and questions.” says Boland.

A woman holds her pregnant partner’s stomach.

The bottom line

Whether you’re at the beginning of your working life or towards the end of it, it’s possible to plan for retirement at every stage.

Also, keep in mind that the ways people are retiring have changed, and you have the freedom to structure your retirement however you want — as long as you build in time for your savings to compound.

“Remember that retirement is a number, not an age so the sooner you start thinking about when you want to retire the sooner you can start planning for it.” says Fernández Paulino

Financial planning can be daunting, but you’re not in this alone. There is a community of financial planners and advisors that cater specifically to the LGBTQ+ experience and community, have been where you are, and they can help you find accessible — even free — resources.

Additionally, there are sources on the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) websites to research financial planners and advisors. 

Be patient with yourself and practice that patience as you work to dream up and create the best plan for yourself and your family.You’ve got this.

LGBTQ+ Financial Planning Resources

Whether you want to hire an LGBTQ+ friendly financial planner or go DIY with your finances, there plenty of resources you can use to get started.

1)    Connect locally

David Auten and John Schneider recommend starting with your local LGBTQ Chamber of Commerce. If you don’t find what you need, try a search through the National LGBT Chamber of Commerce (NGLCC).

2)    Discover online resources

All Options Considered is a blog and resource from Ali and Alison Walker, who became financially independent and retired early. This is a helpful resource for deep diving into the numbers of retiring.

3)    Read all about it

Finance for the People is a book by Paco de Leon, a queer financial expert, and founder of The Hell Yeah Group, a financial firm that helps creatives be more engaged with their personal and business finances.

Retirement Planning Well-Being
Daniella Flores

is a queer, non-binary, and Latine artist, software engineer and creator of the award-winning money and side hustle blog for creatives and LGBTQ+ folks, I Like to Dabble. Daniella’s work has been featured on TIME, Investopedia, MSN, CNBC, LA Times and Business Insider.

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