Men are from Mars and women are from Venus. So says the famous book. Well, when it comes to retirement, men and women are often very different in their needs. For starters, research shows that women are better investors than men. Why? Because women are less likely to feel overconfident in their investment decisions and tend to make fewer changes to their portfolios as a result. Women, however, have a unique set of issues in retirement that often makes them more vulnerable than men. The issues women face can make it harder for them to have an enjoyable retirement without careful planning. These issues include, among other things:
- Longer life expectancy. Women on average live longer than men. This means that they have to plan on making sure their savings last longer as well. A 65-year-old woman can expect to live about 2 ½ years longer than a 65-year-old man. Depending on your expenses, this can add up to a significant amount of money. Overall, women live nearly 5 years longer than men, according to the U.S. Census Bureau. Since women tend to live longer, that means they are more likely to live alone later in life and therefore are likely to have to pay all of the expenses by themselves vs. sharing those expenses with a spouse.
- Caring for an aging parent. It’s of little surprise that the person most likely to take care of an aging parent is their daughter. 61% of caregivers are women vs. 39% men according to AARP. Worse, nearly half of those women have had an adverse effect to their own finances as a result. The number of family caregivers has increased by 20 million from 2015 to 2025. Worse still 6% more are caring for more than one person. This data tells me that the financial burden being placed on these women will continue to increase dramatically in the coming years. Women aged 50 and older who leave their job in order to care for an aging parent miss out on an average of $324,000 in pay according to the Women’s Institute for a Secure Retirement.
- Women typically work fewer years than men due to raising a family, etc., resulting in less savings in retirement plans. Fewer savings and a longer life expectancy can translate into a much less secure retirement.
- Women typically receive less Social Security due to fewer working years and gender pay inequality. As a result, women receive, on average, nearly $4,000 per year less than men, according to the Social Security Administration. Delaying benefits might help offset some of this reduced income, assuming you have enough savings to wait to collect your benefits.
So, what can women do in order to help make their retirement more secure? For starters, meet with a financial planner to discuss your retirement goals. Having a good understanding of what you want retirement to look like is the first key step.
Next, look for ways to maximize your retirement savings. Increase your contribution rates every year, even by a small amount.
Try to delay collecting Social Security benefits in order to maximize your income. Your planner can help with these calculations to see when the optimal time to collect could be.
Lastly, look to contribute to a Health Savings Account (HSA), if possible, in order to mitigate the potentially higher medical expenses that go along with increased longevity.
Women have unique challenges in retirement and therefore, should plan out their own strategy as opposed to just following along with conventional wisdom. Register for our Women & Wealth Monthly Workshops by visiting https://www.reichassetmanagement.com/events.
Source: SSA.gov
Frequently Asked Questions About Retirement Planning for Women
1. Why is retirement planning different for women?
Women often face unique challenges, including longer life expectancy, fewer working years, and lower lifetime earnings. These factors can lead to less savings but a longer time needing to rely on those savings.
2. How does living longer impact retirement planning?
Women typically live several years longer than men, which means their retirement savings need to last longer. They are also more likely to live alone later in life, increasing the need to independently cover all expenses.
3. What steps can women take to strengthen their retirement plan?
Some key strategies include:
- Working with a financial advisor to create a personalized plan
- Increasing retirement contributions over time
- Considering delaying Social Security
- Utilizing tools like Health Savings Accounts (HSAs) to prepare for healthcare costs