Retirement Planning Issues for Women

Effective planning can improve your chances of retiring comfortably

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Women face challenges when planning for retirement. The math and retirement concepts are the same for men, women, and couples, but women tend to live longer than men and face additional headwinds resulting from traditional gender roles. As a result, women are more likely than men to be in poverty after age 65. 

However, women tend to be smart long-term investors, and can retire comfortably with planning and an awareness of the issues they face.

Issue #1: Longevity

If you’re a 65-year-old woman, statistics say you have another 20.7 years of life left, compared with 18.1 years for the average male. That means women need to fund more years of retirement than men do, regardless of age.

Plus, if you’re married to a man, there’s a good chance you’ll outlive your spouse and become solely responsible for your own healthcare and household expenses. The financial burden of not sharing expenses coupled with your longer life expectancy makes it harder for your savings to last.

Issue #2: The Wage Gap

On average, women earn 82 cents for every dollar men earn. That’s problematic in several ways, and can certainly impact your retirement.

Retirement Savings

When there’s less money coming in, it can be hard to save, or save as much, for retirement. Also, you may get less retirement-saving help from your employer than a man does. This is because matching contributions on 401(k) plans are typically based on gross income. So a lower income means fewer matching dollars going into your account.

All other things being equal, women are at a significant disadvantage when it comes to adding to their retirement savings accounts.

Male account holders at Vanguard have account balances that are 50% higher than women’s account balances.

Social Security Income

Social Security looks at your 35 highest-earning years to calculate your monthly retirement income benefit. Social Security is a significant piece of the income puzzle for many retirees: For 70% of unmarried people over age 65, Social Security provides at least half of their income. With a smaller Social Security benefit, you may need to make up the difference with more savings or lower spending levels.

Pension Income

If your job provides a pension, the concept is similar. Some pension systems calculate your monthly retirement benefit with your highest three years of earnings. Those are typically the years near the end of your career—after you’ve earned raises. Still, if effects of the wage gap have depressed your earnings, your pension may be smaller than it should be.

Issue #3: Participation in Household Finances

Almost half of the women in a UBS Wealth Management survey said they let their spouse take the lead on financial matters. That seems to be the case even when their intention before marrying was to be equally involved in household finances. It might be tempting, but it's wrong to think this only applies to previous generations.

Married millennial women were most likely to leave the household finances to a husband, according to a UBS Wealth Management Survey.

With limited visibility into day-to-day finances and long-term planning, women may be left in the dark on things like household debt levels and retirement readiness. And widowed or divorced women may need to get up to speed quickly when forced to manage everything themselves.

In cases of financial abuse or identity theft by a spouse, one spouse may open accounts in the other’s name without their consent. When that happens, it’s difficult to gain independence by getting your own housing, automobile, or bank accounts. That’s why it’s critical to monitor your credit and keep your credit scores as high as possible. 

A Retirement Planning To-Do List for Women

Take steps now to mitigate these issues and set yourself up for a rewarding retirement.

#1: Be Involved

If you’re married, take an active role in financial decisions and stay informed on your household’s financial health. You don’t necessarily need to complete every financial task yourself (you might be busy doing other things or simply prefer other responsibilities), but you need to know what’s going on. Some couples set a monthly or quarterly “money date” to review household finances and long-term goals.

Monitor your credit. Doing so enables you to track how much debt you’re responsible for and uncover any identity theft that may be happening. Get your free credit reports every three months or sign up for a credit monitoring service.

#2: Make a Plan

With a plan in place, you can increase financial confidence, develop productive behaviors, and get input on important topics that might not be on your radar.

A basic retirement plan answers retirement questions like when you can stop working and how much you might expect to spend each year. It should also consider the impact of healthcare expenses and taxes (which reduce the amount you have left for spending). 

Ultimately, you should end up with a projection that details how your retirement income might look based on how much you're saving and how your investments perform. Your plan won’t predict the future perfectly, but it can help you identify problems, avoid unpleasant surprises, and improve your chances of retiring comfortably.

Planning is something you can do on your own or with help from a fee-only financial planner.

#3: Evaluate Your Investment Risk

Women tend to be smart long-term investors—less likely than men to react to temporary market swings and hurt themselves financially. But research from Fidelity suggests that women keep a significant amount in cash. If you’re too conservative, you may miss out on long-term growth that can help you reach your goals. Of course, being aggressive can also have adverse consequences and result in significant losses.

The right investment mix for you depends on your needs and circumstances, like how much you’ve already saved and how soon you expect to retire. Use a risk-tolerance questionnaire to “take your temperature” every few years (or whenever life changes). You don’t necessarily need to follow the suggested outcome religiously, but it’s helpful to get an objective view of how much risk might be appropriate for you. Plus, going through the exercise can help you explore your feelings about risk.

#4: Don’t Leave Money on the Table

If you are married or were previously married, you may be entitled to retirement benefits as a widow or ex-spouse. Contact the Social Security Administration to review your options in detail.

If you are the widow of a Social Security beneficiary, you can generally receive retirement income benefits based on your spouse’s work record. Divorcees may also be eligible if married for at least 10 years.

If you are in the process of divorce, or get divorced in the future, you might be entitled to a portion of your spouse’s retirement savings or pension income. Ask your attorney what makes the most sense, given your situation. You don’t have to pursue those assets, but you should be aware of the option to make an informed decision.

#5: Plan for Long-Term Care (LTC)

At some point in life, you may be unable to care for yourself. For example, it could be difficult to prepare food, bathe, or move around your home. Again, because women tend to live long lives, there’s a decent chance that you will be the only surviving member of your household.

If you need LTC, it’s best to be prepared ahead of time. The national median cost of in-home homemaker services is $4,481 per month, and costs increase as the level of care increases. Although LTC insurance is one option for covering costs, it’s not the only option. Make a plan for how you can get your needs met, which might include downsizing, coordinating with loved ones, or saving money to pay for care out-of-pocket.

#6: Maximize Your Income

With higher earnings, you can save more money. Plus, your Social Security and pension benefits (if applicable) will also be higher. Although it’s easier said than done, maximizing your income should be a priority during your working years. Among other things, that means knowing your worth and developing strategies to ask for promotions and raises.

Key Takeaways

  • Retirement planning for women is unique due to longevity, the general wage gap, and traditional gender roles.
  • Women may end up with less money than men, and elderly women are more likely than men to live in poverty.
  • Financial planning can improve your chances of success and your sense of confidence as you work toward goals.

Article Sources

  1. Congressional Research Service. "Poverty Among Americans Aged 65 and Older." Page 9. Accessed Dec. 8, 2020.

  2. Centers for Disease Control and Prevention. "Mortality in the United States, 2018." Accessed Dec. 8, 2020.

  3. Center for American Progress. "Quick Facts About the Gender Wage Gap." Accessed Dec. 8, 2020.

  4. Vanguard. "How America Saves 2019." Page 51. Accessed Dec. 8, 2020.

  5. Social Security. "Fact Sheet: Social Security." Accessed Dec. 8, 2020.

  6. UBS. "New UBS Report Reveals That Joint Financial Participation Is the Key to Gender Equality." Accessed Dec. 8, 2020.

  7. Financial Times. "Women Trade Less Often Than Men, With Better Results." Accessed Dec. 8, 2020.

  8. Fidelity. "Five Financial Fundamentals Impacting Women." Accessed Dec. 8, 2020.

  9. Genworth. "Cost of Care Survey." Accessed Dec. 8, 2020.