How secure are you feeling about your retirement? Are you optimistic about your ability to afford the retirement lifestyle you really want? The response probably differs for women answering this question versus males of the same age.
Preparing for a comfortable and satisfying retirement is often on people’s minds once they reach age 50. According to the most recent Retirement Confidence Survey by the Employee Benefit Research Institute, a majority of those currently working (66%) and those already in retirement (75%) are either “very” or “somewhat” confident about having enough money to live the retirement lifestyle they prefer. But the disparity between men and women with respect to confidence about retirement is pretty stark; only 19% of women participating in a Transamerica Center for Retirement Studies survey said they were “very” confident of being able to retire comfortably; another 41% said they were “somewhat” confident.
On one level, this may not be too surprising. First, there is a persistent earnings gap. Though the situation is improving, women still earn, on average, only 84 cents for every dollar earned by their male counterparts doing the same work. Not only that, but most women aren’t able to spend as much time in the workforce as men; women are much more likely than men to work part-time jobs, and because those providing care to dependent children or aging relatives are overwhelmingly women, they often lose years in the workforce due to caregiving duties. All this adds up to extra challenges for women with respect to retirement planning and funding; they tend to earn less when they are working, and they tend to pay less into employer-sponsored retirement plans and the Social Security system because of fewer years spent in income-earning pursuits.
Second, there’s the “double-bind” of longer life expectancy. Though women typically have less in retirement savings than men, women tend to live longer in retirement than males of the same age (19.66 years for a 65-year-old woman, vs. 16.94 years for a man of the same age). In other words, a woman will typically need to fund a longer retirement than a man of the same age—but they will potentially have less savings to fund it. Additionally, since the probability of having healthcare challenges that require accommodations, like long-term care and other specialized arrangements, increases with a longer lifespan, women in retirement may also require more funds allocated to healthcare costs than their male counterparts.
Widows and Retirement
Given the life expectancy differences mentioned above, unfortunately, married women suffer bereavement more often than men. Therefore, more women than men will face retirement after the death of a spouse. What can widows approaching or already in retirement do to prepare for and manage some of the special challenges mentioned above?
- Start saving early for extra healthcare costs. This sounds like common sense, but it bears frequent mention. A woman in her early to mid-forties can invest a little extra now and, with growth and compounding, fund the additional healthcare costs she may face in retirement, due to her longer lifespan. A man in his mid-forties can invest a little over $41,000 today and expect to be able to pay for the retirement healthcare he is likely to need. A woman of the same age would need to invest a bit more than $46,000.
- Make smart Medicare choices. Studies have shown that many seniors, including women, tend to be overly complacent about understanding and exercising their options for Medicare and Medicare supplemental coverage; statistically, only about a third of seniors shop for the best deal in Medicare coverage. Widows can’t afford the luxury of complacency; instead, they should make detailed comparisons and recruit the assistance of a trusted advisor who can help them make sure they get the best plan for their money.
- Know all your Social Security options. Negotiating the complexities of the Social Security system is never a picnic, and figuring out the complex calculus surrounding spousal benefits can be even trickier. But for widows—especially those who may have spent very few years in the workforce—spousal benefits can be a foundational part of retirement income planning. It should be noted that spousal benefits are available for both male and female spouses, but the vast majority of spousal benefits claimants are women (by nearly eleven times).
- Get the right people on your team. Perhaps the most important decision a widow can make—especially if she is one of the 58% of women who say they left the financial decisions to their husbands—is picking the right financial advisor. A fiduciary financial advisor can help you look at your total financial picture and provide coaching and guidance for developing a retirement funding plan that makes the most of what you already have and provides for a more secure future. Your advisor can look at your total picture—your home, your investment accounts, any retirement accounts you have access to, proceeds of insurance and annuity policies, and everything else—and provide professional recommendations for utilizing your assets effectively. Most importantly, a fiduciary advisor will provide recommendations that place your best interests ahead of their own. In other words, they are working to benefit you, first and foremost.
At Curio, we’ve built our approach to financial planning on the principle of asking good questions—and then listening carefully to the answers as they will lead to the most informed and helpful planning recommendations. To learn more about how we can help you create a solid plan for funding a secure retirement, please visit our website.
