Key Takeaways
- Women both live longer than men and tend to build up less wealth than men.
- Get involved with retirement planning decisions and strategies.
- More than half of entrepreneurs believe they will significantly exceed their past business growth in the future.
The longer life expectancies that many Americans have come to enjoy are a bit of a double- edged sword. On one hand, greater longevity sets the stage for more time to spend doing amazing things and enjoying special moments with loved ones.
On the other hand, living longer can put you at greater risk of outliving your savings and experiencing other challenges that may turn your golden years into pyrite.
Women, in particular, are likely to confront a number of financial risks during their 60s, 70s and beyond. The main reason: Women have a well-established history of living longer than men as well as building less wealth than men over their lifetimes. That one-two punch can make retirement feel like a bit of a minefield for many women—even those with significant wealth.
The good news: As a woman, there are steps you can take that can potentially put you in a better position for retirement.
Retirement challenges for women
Certainly funding a comfortable retirement has the potential to be a challenging process for anyone. But the fact is that women face some unique hurdles that make their march toward retirement that much steeper. For example:
1. Women live longer
Women live almost six years longer than men on average, to age 79 versus 73½ years old, respectively, according to the Centers for Disease Control and Prevention. The CDC has also forecast life expectancy at birth for women in 2019 at 81.4 years versus 76.3 years for men. But at age 65, women are likely to live nearly another 21 years compared to men’s additional expected 18 years.
What’s more, affluent women tend to live even longer. One study by researchers at Harvard, MIT and elsewhere found that women in the top 1% of wealth were expected to live to 88.9— 10.1 years longer than those in the bottom 1%. Those extra years can boost the odds of women both running out of money and spending some of their retirement years without a partner for support.
Living longer may also lead to spending more money on health care costs. More than 70% of assisted living residents are women, and over half of nursing home residents are female, according to statistics compiled by Zippia.
2. Women build less wealth
Women’s financial health is also generally less sound than men’s. U.S. Census Bureau data shows that just 22% of women have $100,000 or more saved for retirement, while 30% of men do. What’s more, U.S. women are projected to reach retirement with just 75% of the wealth accumulated by men, according to Willis Towers Watson.
This disparity can lead to some alarming outcomes. For example, women 65 and older are 80% more likely than men of the same age to be living in poverty, according to The National Institute on Retirement Security.
If you have significant assets, you may not be likely to become impoverished, of course. But the research highlights the risks that women, in particular, face when it comes to having adequate funds to live a comfortable lifestyle in retirement.
Driving forces
An obvious question is what is driving the retirement challenges that are having a particularly big impact on women. We see several reasons why women have a higher probability of struggling financially during their retirement. For example:
1. The gender pay gap
Although the wage gap between men and women has narrowed over the years, women still make only 82 cents for each dollar men make, according to Pew Research. What’s more, men still dominate 15 of the 20 highest-paying jobs—and women with bachelor’s degrees and full-time jobs earn 26% less than their male peers, according to the American Association of University Women. Such gaps contribute to outcomes including:
- Lower savings potential. Less income leaves many women with less money to allocate to savings. Research by AARP shows that women have about 30% less saved by the time they retire than men do.
- A smaller safety net. Since Social Security benefits are based on income, women’s lower income can decrease their retirement benefits.
2. Career interruptions
Women historically have been more likely than men to be the primary family caregiver, taking time off (often unpaid) to raise their children or take care of family members. Such career interruptions can result in lower-paying jobs for women or more sporadic income streams— causing lower earnings and opportunities to save and invest over their lifetimes. One study by the Urban Institute shows that caregiving costs women nearly $300,000 in lost earnings over their lifetime.
3. High health care costs
A 65-year-old woman retiring today might expect to spend about $155,000 on health care, versus $134,000 for a 65-year-old man, according to Milliman research. Some of that extra expense is due to women’s longer life expectancy, but some is due to potentially costly health issues. Research out of the University of Southern California finds that more women than men are spending a larger share of their later years with a disability.
4. Less focus on retirement planning
Due to lower lifetime earnings and more time spent on caregiving, women often find themselves less inclined or able to focus on investing for retirement. According to a study from YouGov Omnibus, 52% of women have never held an investment product, compared to 37% of men.
One reason appears to be a lack of confidence and knowledge about investments. While 45% of men said that they would feel confident investing some of their money, the figure among women was just 28%. And while more than four in ten men (43%) say they would know how to find suitable investment products if they wanted to invest some of their money, the same was true of only 27% of women.
Strategies to consider
Some of the biggest systemic challenges for women won’t likely be solved overnight. The good news is that a successful retirement is possible for women who harness various strategies. Some ideas to consider:
1. Plan for a multistage retirement.
The facts point to women in general living longer than men; therefore, heterosexual women with a partner should consider what retirement will look like as part of a shared journey and, later, as a solo voyage. Each stage may have different financial requirements and costs as well as other issues to navigate.
The solo stage, if it occurs, is likely to be more expensive and complicated as you age and potentially face increased health care costs and responsibilities you’ll need to address on your own instead of with a partner. Planning for a multistage retirement should involve honest discussions about investing and spending—as well as wishes and needs—with advisors, family members and others who might one day be involved in helping with caregiving.
2. Get involved—and stay involved—with family finances.
If you’re not already, look to be an active partner in investment decisions and other financial matters. That might mean learning more about aspects of financial planning and retirement spending (from your advisor, books, adult ed classes and other resources), as being financially literate can be crucial in making wise, confident decisions about wealth—or even simply understanding actions that people may want to take on your behalf.
3. Job hop.
If you work, look for ways to increase your take-home pay. One idea is to job hop. Pew Research found that 60% of workers who changed jobs saw an increase in their real earnings, versus only 47% of those who remained with the same employer. Staying in the workforce for a longer period of time is another way to potentially arrive at retirement with more money saved up. It could also help you build up additional Social Security credits that result in more retirement income.
Another advantage to working longer: People with “post-retirement” jobs related to their previous careers reported better mental health than those who fully retired, according to research published in the Journal of Occupational Health Psychology.
4. Allocate more money to retirement savings.
An obvious move—one that could be easier said than done, of course—is to set aside more money in retirement-focused accounts. That might mean putting more into a 401(k) or Roth IRA, or a health savings account designed to help fund health care expenses. There are also spousal IRAs, which let a working partner open an IRA for a nonworking spouse to save for retirement. Consult with a professional about the rules, benefits and risks of any retirement savings option you’re considering.
Conclusion
Retirement can present some unique and tough challenges for women. But there are plenty of ways you can increase the likelihood of living the lifestyle you desire and remaining in healthy financial shape throughout your golden years.
VFO Inner Circle Special Report
By John J. Bowen Jr.
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