Why Women Need More Retirement Planning Than Men

By Rebekah Curry

One of my dear family friends, Tina, just turned 68. She’s retired, divorced, living alone in her home of 25 years and terrified of running out of money. A few weeks ago we had a heart to heart about her personal finances and retirement over dinner.

She expressed how she wished she had saved more and taken the time to learn about investing during her working years. As much as she would like to pick up part-time work to bring in some extra income now, her health conditions make it difficult. While she was married, she relied on her spouse to handle all of their finances and never spent much time budgeting or putting together a retirement plan. Her ex-husband did it all.

Fortunately, she is receiving Social Security benefits and a small pension. But Tina is spending more than she expected on healthcare and her retirement savings are getting depleted much faster than she anticipated.

Many other women just like Tina have come into hard times during their retirement years and wished they paid more attention to their personal finances while they were younger. If you have similar fears, don’t panic. It’s not too late for you and the women you care about to put together a more comprehensive retirement plan.

There are a few reasons why women need to pay more attention to their retirement planning than men for a financially stress-free future.

Women’s Unique Characteristics Can Impact Retirement Planning

Why do women typically need more retirement planning than men? Here are a few key reasons why women should take extra steps to ensure their financial security during their golden years.

  • Women’s life expectancy exceed men’s and women often live more years without a spouse. Recent data by the Social Security Administration found that on average women are living over two years longer than men to age 86.6 versus 84.3. In addition, it’s important to know that about 25 percent of adults aged 65 today will live past 90 and 10 percent beyond age 95.

  • Unfortunately, women are still earning less than men. The World Economic Forum estimates it will take 118 more years for the gender wage gap to close. The wage gap actually worsened this year widening to 64 percent from 66 percent, which is concerning. Less income earned by the female workforce also means lower Social Security benefits for women.

  • Studies show that women are often more conservative in their investment styles, which can translate to less growth. Women have a tendency to hold more cash than men and are less willing to take on added risk for the chance at greater returns.

  • Due to childbearing and raising a family, women tend to have fewer working years in their careers than men. Being out of the workforce for long periods of time can make it difficult to re-enter, especially due to rapidly changing software and technology.

Women Labor Force Statistics

Source: Department Of Labor

Simple Steps Women Can Take For Greater Financial Security

Now that you are aware of some of the unique circumstances that women face in retirement, let’s explore several simple steps you can take to ensure your own financial security and a comfortable retirement.

1. Max Out Your 401(k) Plan

It’s not too late to start participating in your employer’s 401(k) plan. If your employee benefits include a company match, take full advantage of it every year. The maximum 401(k) contribution set by the IRS is $18,000 for 2016. The sooner you can start maxing out your 401(k) contributions, the better. But if you are unable to contribute the annual limit, at least do your best to get the full company match.

2. Open An Individual Retirement Account (IRA)

Whether or not you have access to a 401(k) plan at work, you can choose to open a traditional or Roth IRA account. IRAs are a highly common way to continue growing your retirement savings and they are easy to setup and fund. The downside of IRAs, however, is the maximum contribution amounts are much lower than 401(k) plans. In 2016, IRA contributions cannot exceed $5,500 for those aged 49 and under or $6,500 for people 50 and over.

3. Get Help With Your Investment Portfolio

Are you sitting on a lot of cash? Being too conservative with your money and holding a lot of cash leaves you vulnerable to inflation. Don’t let your money lose value because you’re too afraid to invest. Get help with your investment portfolio and find a comfortable asset allocation that matches your time horizon and financial goals.

4. Plan For Long-Term Care Before You Need It

There’s no denying that healthcare expenses are rising. Studies estimate that Americans could face rising healthcare costs of 6 percent or more per year through 2023. Just because you have health insurance, does not necessary mean it includes long-term care coverage. Talk to your healthcare provider and ask for clarification. Purchasing a separate long-term care policy could be to your advantage. The high costs of long-term care could quickly eat away at your retirement savings if your health deteriorates quickly and you’re unprepared.

5. Increase Your Personal Finance Knowledge

Many women, like my friend Tina, end up divorced or widowed at some point in their lives. Don’t let unfortunate circumstances leave you feeling financially lost. Increase your financial knowledge in our Learning Center. Remember, you’re never too old to become financially savvy.

6. Learn About Social Security And Medicare Options

If you haven’t created a Social Security account online on the official Social Security website, it’s a good idea to do so even if you don’t anticipate collecting benefits in the near-term. Once you complete your profile you can easily access your earnings history and benefits information. Check for any inaccuracies and use your benefit estimates to assist in your retirement planning. Start to familiarize yourself with the various Medicare options as well. Be aware you may need to plan for out-of-pocket costs for certain expenses Medicare that doesn’t cover such as hearing aids and eyeglasses.

Financial Independence is Within Reach

It’s important for everyone to develop a comprehensive retirement plan with savings goals. The earlier you can start contributing to your retirement accounts and putting your money to work, the better.

Women have many unique characteristics that warrant more retirement planning than men. Longer life expectancies, lower incomes, less time in the workforce, and being more conservative with their investment strategies can all impact women’s needs in retirement.

Visit aboutLife to learn more about how to have the retirement you want. We’re here to help you put together a retirement plan that can secure your finances so you can live comfortably during your golden years.