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Great Advice From Our Experts

Why retirement planning for women is different

November 4th, 2019

Did you know that women face retirement planning challenges that most men never encounter? It’s true, though if you ask most financial planners about it, they’ll tell you that every retirement plan is unique because every retiree is as well. However, while there are certainly plenty of variables that can affect anyone’s retirement plan, that doesn’t change the fact that women often encounter more roadblocks than men.

So, what does this mean for women who are planning for retirement?

It’s important to acknowledge that women will face unique challenges when planning for their retirement. If we ignore this fact, or sideline it, we’re not going to take the steps necessary to offset them. Instead, we need to be aware. This will allow us to create an action plan to mitigate specific roadblocks that women may encounter including:

  • On average, women live longer than men. According to the Social Security Administration, women tend to outlive men by at least two-and-a-half years. Coupled with the fact that one out of every three 65-year-olds will live past 90, and one out of seven will live past 95, you have quite a retirement fund to consider. So, while living longer is obviously a positive challenge to face, it also means that women should plan to retire later than men or start building up a sizeable nest egg if they want to retire before they’re 70 years old.
  • On average, women earn less than men. According to the Institute for Women’s Policy Research, last year women earned 82-cents for every dollar earned by men—an 18 percent gender wage gap. When IWPR analyzed the past 15 years of women’s and men’s lifetime earnings, women made a mere 49 percent of what men made. That means they brought home only half of what men did in their lifetime.Sure, some of this discrepancy might be because some women spend fewer years in the workforce on average than men, but that doesn’t make the difference any less of a retirement planning challenge. After all, if most retirement plans are based on lifetime earnings, that’s a 51 percent roadblock many women will need to hurdle. And because the wage gap also impacts women’s overall social security and pension benefits, they’ll need to rely even more on retirement savings.
  • Women continue to be the primary family caregiver. While stay-at-home dads are becoming an increasingly popular option, women still tend to be the primary caregiver when their children are younger. This means a lot of women leave the workforce to raise their families which makes it hard for stay-at-home moms to catch up with their retirement savings once their children are in school.If this happens early in a woman’s life, she might be able to overcome it by working for a company with matching 401(k) contributions and a good compounding interest benefit. But she’ll still wind up with smaller social security and pension benefits than most men.

    Women are also usually first in line to care for elderly parents. In fact, according to the Family Caregiver Alliance, 66 percent of caregivers are women. On average, they spend 20 hours per week caring for an elderly parent—which means taking time off work or cutting back their hours. This puts them further behind on their retirement savings plans.

  • Retirement healthcare costs are higher for women than for men. Based on the 2019 Fidelity Investments Annual Retiree Health Care Cost Estimate Report, women can expect to spend an average of $150,000 on healthcare expenses during their retirement years. This is around $15,000 more than what men can expect to spend. This doesn’t even include long-term care expenses which continue to rise.Based on Genworth’s recent survey, a retiree can expect to spend anywhere between $18,720 for adult daycare expenses to $100,375 for fulltime nursing room care PER YEAR! Obviously, with women living longer, this type of expense will drain a retirement plan fast. All the more reason for women to take an active role in properly planning for their retirement.
  • Women tend to be more risk-averse than men when it comes to investing. Multiple studies have shown that women, on average, tend to be more conservative than men when it comes to investing. Many prefer to play it safe, especially as they near their retirement years. While this is a smart move when nearing retirement, it also results in slower growth and a smaller retirement fund.There are multiple factors that can cause women to be cautious with their investments, including having a smaller fund to work with all together. But this tendency towards “playing it safe” shouldn’t be something one just accepts. Women who are planning their retirement investments might consider thoroughly investigating whether a few risks might bring better rewards.

    Finding a trusted financial advisor who has a proven track record of investing smartly is a great way to proceed. A good financial advisor will point out areas where their client is holding back and missing out on growth opportunities, though at end of the day, he or she can only give advice. It will be up to the investor to make the ultimate decision on how she invests her retirement dollars.

What do all of these retirement planning challenges mean for women?

Simply put, women need to make retirement planning a priority. Making the time to work with a financial advisor to build a personalized financial retirement strategy is key to being prepared and overcoming gender challenges during the golden years.

While many advisors will make a single retirement plan for married couples, it’s important for women to play an active part in this planning process. It shouldn’t be left for their spouse to “handle.” Fears or hesitations due to not understanding investments fully should be set aside. Retirees of all genders are rarely experts in investing finance. It’s why financial advisors go to school and get a degree to do what they do.

If you’re a women, don’t put off preparing for retirement. Now is the best time to work with a financial advisor to develop a solid plan. It’s the smartest step you can take towards controlling your financial future.