Jessica Wunder

Women and Financial Planning

The theme for 2018’s International Women’s Day campaign is #BalanceforBetter, “Think equal, build smart, innovate for change”.  It is a time to applaud the progress of women’s achievements around the world.

However, even with incredible progress, women face unique circumstances when approaching retirement.

Women Live Longer Than Men

Because women tend to live longer than men, they likely will have a longer retirement. This is great, but it also means that you will need to fund that longer retirement. On average in the US, women will need to pay for almost 5 more years of retirement. It’s important to remember that when your spouse dies, you may also lose some of your reliable income for pensions or annuities.

Women Tend to Be More Conservative Financially

Being overconfident is one of the worst things that you can be when you are preparing for retirement, and we are all wildly overconfident. However, women tend to be a little less overconfident than men. Because of this, women tend to be more risk averse. There’s nothing inherently good or bad about this, but it is something that is important to pay attention to, especially if you are married. How spouses feel about risk is one of the most common disagreements in retirement planning, and because husbands often handle a couple’s finances, the wife’s lower risk tolerance gets left by the wayside.

Women Have Lower Salaries (On Average)

According to the Bureau of Labor Statistics, women earned ~81% of men’s earnings in 2017, based on the median weekly earnings for full-time wage and salary workers.  This, in addition to longevity, puts women at a higher risk of poverty in retirement. According to The National Institute on Retirement Security, women are 80% more likely to be impoverished in retirement.

Women Have Fewer Years of Work

Women tend to be the caregivers, both for children and for parents:  According to the National Alliance for Caregiving and AARP, women are the primary caregivers for their family at 61% vs men at 39%. They are likely to spend an average of 12 years out of the workforce raising children and caring for an older relative or friend.   This time out of the workforce can put an extra strain on retirement income.

Women Often Don’t Like Talking About Money

A lot of people don’t like talking about money. It’s one of those subjects, along with politics, religion, and a few others, that are taboo. However, it’s important to talk about your finances – maybe not with the person sitting next to you on the bus, but at the very least with your spouse since your retirement planning will (hopefully) affect you both.

Fidelity’s 2015 Money FIT Women study has some pretty shocking numbers to back this up. Of the women they surveyed, approximately 80% have refrained from talking about finances with those they are close to, and 65% of women are disinclined to talk about investments with their partner. Even more than that, more than 50% of women would be uncomfortable discussing money and investing with a financial professional.

This has serious consequences. As I mentioned earlier, women, especially married women, take a back seat in preparing for their own retirement. This means that for the average married woman, you will have someone designing your retirement plan who is comfortable with taking on more risk than you might be, and you’ll likely have to live with the consequences for longer than them. In other words, you’ll just need to hope that everything works out.

As we have said before, hope is not a retirement plan. You need to be an active participant in your own retirement, and you can do that by being involved in the retirement income planning process. This is not something that should go on the list of chores to be divvied out; everyone needs to be involved in planning for their own retirement. Although women today have more opportunity to build wealth and invest for the future, there is still a long way to go to bridge the gap.

Next, read How Long Can Retirees Expect to Live Once They Hit 65.

Retirement Researcher is a SEC registered investment adviser. The content of this publication reflects the views of Retirement Researcher (RR) and sources deemed by RR to be reliable. There are many different interpretations of investment statistics and many different ideas about how to best use them. Past performance is not indicative of future performance. The information provided is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy or sell securities. There are no warranties, expressed or implied, as to accuracy, completeness, or results obtained from any information on this presentation. Indexes are not available for direct investment. All investments involve risk.

The information throughout this presentation, whether stock quotes, charts, articles, or any other statements regarding market or other financial information, is obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission there of to the user. RR only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. It does not provide tax, legal, or accounting advice. The information contained in this presentation does not take into account your particular investment objectives, financial situation, or needs, and you should, in considering this material, discuss your individual circumstances with professionals in those areas before making any decisions.