First, the bad news -- women in general are not well positioned for retirement. Here's why:

  • They typically haven't saved and invested enough (nor have men).
  • They typically don't work as many years as men do, because they take some time off to care for children or parents. This means they accumulate less money over their lifetimes.
  • They often are paid less than men.
  • They live longer than men, meaning that their more meager savings must last longer.
  • And like most of us, they can't count on Social Security providing all they need. They face a disastrous retirement scenario.

And the picture gets worse: Women often leave their household's financial management, at least the investment portion of it, to menfolk. And menfolk tend to gravitate toward riskier fare, while women tend to be more conservative.

Some women are directed to take on riskier investments. According to a study by Wharton Business School professors David Babbel and Craig Merrill, many women are told to invest more aggressively to ensure that their nest eggs will last long enough. Yet risky investments are just that -- risky. They can derail a retirement rather than bolster one.

What to do
Fortunately, there are ways that women can set themselves up to be comfortable in retirement. One way is to simply save and invest enough throughout our working lives to support ourselves in our non-working lives. That approach can be problematic, though. For one thing, it's hard to figure out exactly how much you'll need to live on. Should you be aiming to accumulate $1 million before retirement? $2 million?

I've learned from the Fool's Rule Your Retirement newsletter service that to make your nest egg last, you should plan conservatively and withdraw about 4% of it per year in retirement. So, 4% of $1 million is almost $40,000, or about $3,300 per month. For $2 million, it comes to $80,000, or $6,700 monthly.

Another problem is the unpredictability of the stock market. If you have your nest egg invested in it and it drops by more than 10%, as the S&P 500 has done over the past year, it can have a big impact on your ultimate comfort. That's one reason why we recommend keeping money you'll need within the next five years out of stocks -- but then that means it will likely grow more slowly.

One solution is ...
Some experts recommend immediate income annuities as a great tool for women. With these annuities, you pay a relatively big sum up front; in exchange, you'll be paid a certain sum regularly, for the rest of your life.

To give you a sense of how large an income you can get from an immediate annuity, here are some quotes one online service generated for me:

  • A 52-year-old woman in New Jersey can buy about $520 per month ($6,240 annually) with $100,000. To see what a half-million-dollar investment will get you, just multiply by five -- $2,600 monthly, or $31,200 annually.
  • A 65-year-old woman in Nebraska can buy about $630 per month ($7,560 annually) with $100,000, for the rest of her life.

On top of Social Security or whatever other assets you might be counting on, those can be very helpful income streams. And best of all, they'll last for the rest of the buyer's life. You can get even higher payouts if you buy annuities set to expire after a fixed number of years. The 52-year-old woman, for example, can increase her payout to around $650 monthly, or $7,800 yearly, if she agrees to take payments for only 20 years. But remember that a 52-year-old may well live another 40 years! The study notes that healthy women of retirement age can easily live 30 years past retirement or longer.

Build that nest egg
If you need to build your nest egg over a decade or three, in preparation for retirement (and perhaps to buy an income annuity), consider stocks and funds. The Janus Contrarian (JSVAX) fund, for example, has averaged a market-beating 14% return over the past five years, and includes stocks like Chesapeake Energy (NYSE:CHK), DirecTV  (NYSE:DTV), and Amgen (NASDAQ:AMGN) among its top holdings.            

Individual stocks can give you great returns, too. Some stocks that have generated double-digit average annual returns in the past decade include (NASDAQ:AMZN) at 18%, Hansen Natural (NASDAQ:HANS) at 45%, and PepsiCo (NYSE:PEP) and Wells Fargo (NYSE:WFC) at 10%. Of course, none of them are free of risk, which is why diversification is so important.

Let us guide you
We'd love to help you with your retirement planning. Our Rule Your Retirement newsletter service offers great guidance, helping you avoid retirement killers. A free trial will give you full access to all past issues. It regularly offers recommendations of promising stocks and mutual funds, too.