5 Ways Retirement Planning is Different for Women

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Retirement planning for women can be uniquely different to that of retirement planning for a man of similar age, socio-economic background, and assets. When developing relationships, advisors need to understand that women may come to the table with different needs and challenges when it comes to retirement planning.

Women of all ages and backgrounds can face different challenges as they plan their retirement. These challenges are related to financial literacy, a wage gap and less savings, long-term care needs, and often finding themselves in caregiving roles which can further impact earning potential and retirement savings. One of the more challenging aspects of retirement planning for clients is the financial literacy gap that exists for women.

The Financial Literacy and Retirement Planning Gap

Women are three times as likely as men to say they can’t afford to save for retirement and have significantly lower rates of financial literacy when compared to their male peers. According to Annuity.org, women demonstrate a lower understanding of retirement savings plans, including 401(k)s and IRAs, when compared to men during financial literacy assessments.

A lack of a strong financial foundation on which to make informed financial decisions has led many women to not conduct a calculation or estimate of their retirement savings needs accurately. More than 4 in 5 women claim to have a plan for where their income will come from in retirement; however, only 1 in 3 women report having a formal, comprehensive, written retirement plan.  This planning gap does exist among men as well but at a much less prevalent rate and suggests income plans are either far less formal or not well understood.

Understanding the unique challenges that women face when retirement planning can help you as an advisor build relationships and future plans for your clients. Let’s look at that facts that can impact how you advise your clients and approach their long-term retirement planning and long-term care.

5 Ways Retirement is Different for Women

There are several factors that can impact retirement planning for women.

1. Women live longer and long-term/healthcare costs are exponentially higher.

Women earn less, save less, and live longer — but are still responsible for the same living expenses that men pay during retirement. And since they live longer, they face additional costs, including more long-term and overall health care expenses during retirement.

2. Women are primary caregivers for both young and elderly.

Women are still the primary caregivers for both young and elderly family members. The burden of care can impact the ability to work full-time. In fact, caregiving reduces the time that women can work by nearly 41%. Although men also provide assistance, female caregivers may spend as much as 50% more time providing care than male caregivers. The time spent caregiving reduces earnings potential during the course of a woman’s career.

3. Women face a wage gap their entire career.

Women earn less money throughout their careers – earning 80 cents on the dollar compared to their similar male counterparts. Women are also more likely than men to be concerned about running out of money in retirement. 

4. Women are working longer but saving less.

The oldest among the baby boomer generation are staying in the labor force at the highest annual rate for people their age in more than 50 years. This is largely comprised of women of the baby boomer generation. Many delay retirement and remain in the workforce longer as fewer jobs offer pensions, while more offer voluntary retirement savings plans, leaving retirees more uncertain about their finances.

5. Women may be more conservative when it comes to investing for retirement.

According to the Women’s Financial Literary Report, nearly half of women rate their investment risk tolerance as conservative compared to only 3 in 10 men. There is no difference in risk tolerance by race or ethnicity, though women over age 65 and those with assets under $500,000 tend to be more conservative in their investment strategies. This risk aversion can change how agents and advisors position a portfolio and strategy. 

Overcoming these obstacles demands serious dedication to financial literacy education and a holistic strategy that realistically address the client concerns and the societal challenges that women face planning retirement.

Women Are Taking Control of Their Finances

Women are increasingly taking ownership of their household’s financial management and their retirement planning working closely with financial agents and advisors. The majority of women ages 50 to 75 and with assets of at least $100,000 work with a financial advisor and are more open to professional financial advice than men. Additionally, more than 9 in 10 women with partners or spouses equally share or lead financial and investment decision-making for their households. Women are recognizing the gaps exist in their understanding of their retirement planning and are seeking to close those gaps. As advisors and agents support their clients of all backgrounds and demographics, it’s important to bear in mind these unique facts for women as they approach retirement planning and retirement age.