Women Face Unique Retirement Planning Challenges

Women Face Unique Retirement Planning Challenges

Written by: Soren T. Christensen, CFP®, CIMA®, ChFC®, MBA, Founder & Chief Planning Officer, Advanced Wealth Advisors

As the proud husband of a very successful businesswoman and proud father of two daughters, I’ve taken a keen interest in the unique financial challenges these ladies, the most important people in my world, may face in their lives. I’ve also had the pleasure of working with many female clients who have helped illuminate unique issues women face in financial planning and wealth management. In this article, I’ll shed some light on a few challenges women should keep in mind when it comes to their retirement planning.

Women Should Consider More Savings and More Risk

I hope that when my daughters enter the workforce, it is no longer true that women earn less than men for the same work. However, statistics as recent as 2016 show that women earn, on average, 80 cents on the dollar compared to their male counterparts (US Census Bureau). This means that women need to defer a higher percentage of a lower wage simply to match the eventual retirement funds of a male co-worker. Additional hurdles arise as some women take time off from their careers to raise children or to care for elderly parents, reducing their time spent in the workforce compared to men, and thus further limiting earned income and potential savings.

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Different investment management behavior of the genders, as described by statistics, further compounds the problem of women being underpaid. According a study by financial services firm TIAA women surveyed had significantly higher levels of cash and annuities than men, and significantly lower levels of stocks. Stocks can be a critical and rewarding asset class in a long-term investment portfolio. Compared to other major asset classes such as cash and bonds, they have a higher level of risk. But, over a long time-horizon, stocks typically outperform other asset classes on returns. Women can face smaller retirement nest eggs if they favor more conservative asset classes, with historically lower returns.

Living Longer Has Its Benefits, and Its Costs

Few people will complain about living too long; however, longevity does bring challenges. It is a well-known fact that women generally outlive men. In fact, a 65-year-old woman will outlive a man of the same age by an average of 2.6 years, according to the U.S. Social Security administration. Importantly, though, we must also consider that, on average, married women are 2.3 years younger than their spouses (Science Daily). This further increases the likelihood of a married woman outliving her spouse.

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Whether a woman is single, married, or widowed when she reaches retirement, she still enters having fought through the pre-retirement challenges previously discussed. Those issues lead to women, on average, having smaller retirement nest eggs than men. This is a disturbing fact since we know that by having more years in retirement, women actually require more funds than men, not less.

Another compounding factor is that women pay more in healthcare costs than men. This is simply another financial reality of living longer. According to The Wall Street Journal, women’s healthcare costs in retirement exceed men’s by 20 percent. With longer life expectancy comes a greater probability of developing serious medical issues, and less chance of having a spouse-caregiver. These and other issues contribute to higher healthcare costs for women in retirement.

So, What Can I Do?

As I’ve learned quite quickly from my wife, mother, sister and other important women in my life, women are far better equipped to deal with challenges than men. I’m confident that any woman reading this article will be able to successfully combat these challenges by considering the following tips:

  • Save early, often, and more
  • Ensure that you have the proper asset mix in your investment portfolio
  • Recognize that living longer has its benefits, and its costs
  • Create a financial plan unique not just to your gender, but to you as an individual

These four tips are just a few to help you overcome the distinct challenges you will likely face, both pre and post-retirement. I recommend meeting with a competent financial advisor who can build a plan that takes into account all of the unique issues you may face, in addition to the ones mentioned in this article. I’m not naïve enough to believe these are the only issues women face. Each woman, just like each person, has their own idiosyncratic challenges when it comes to retirement planning. Make sure you have an advisor who understands those as well, to put you in the best position to enjoy a successful retirement.

Would you like to speak with a financial advisor who can assist you with your retirement planning? Click here to contact Soren Christensen and Advanced Wealth Advisors now.