Why Retirement Planning is Different for Women: Statistics You Need to Hear
Most of the retirement planning advice out there is written by men, for men. Often, this isn’t their intention – retirement advice is universal, right?
Well, no, it’s not. As women, we face a unique set of challenges when it comes to planning for our twilight years and most financial planners (or even personal finance bloggers) fail to acknowledge this.
Why is Retirement Planning Different for Women?
The main reason is not simply that many of us take time out of the workforce to raise children, or a comment on the gender pay gap that many women still face (though for many both of those things are a factor); we require sex-specific retirement planning simply because we live longer than men.
On average, women outlive live men by 5 years, and while perhaps thirty years ago that would equate to a couple passing at say, 73 and 78 years old, the average lifespan is rapidly increasing.
More women than ever are living well beyond this, and in fact, by age 85 the ratio of women to men still living from a birth year is 2:1. By the time we reach triple figures, 81% of centenarians are women.
So, what does that mean for women? It means we are likely to have far more years on this earth to enjoy life. And we want to – 64% of women want to live to see a hundred or better.
This is great news, but that also means we need to plan for retirement differently.
The Financial Ramifications of a Long Life
Let’s look at the figures. (I know it can be uncomfortable, but stick with me because it’s important you know the reality of your situation so we can plan effectively.) A typical retirement costs $738,000. If you retire at 55 and live to be 78, the average American lifespan, that offers you $32,000 a year to live off, assuming none of it is taxed.
Now, imagine you have the same amount saved when you start retirement but you live to be 85. This means instead of 23 years of retirement you get 30 years. That $32,000 a year drops to $24,600.
Of course, there are many variables in real life – such as where your money is, your desired standard of living, and if you or a partner requires increasing healthcare costs, which unfortunately, we frequently do.
Add to all this the reality that only 9% of American women have more than $300,000 saved, and only 70% of women have a retirement plan by the age of 44, and it looks like living a long healthy life may equate to running out of money prematurely.
The Partner Problem
Even when we remove the long-life factor, we still face problems as women. According to the Center for Retirement Research at Boston College, 46% of married women in their 50s in a two-income household are at risk of being unable to maintain their standard of living in requirement. Why?
Because two-income households typically live a “bigger” lifestyle and save less over the long term. Women are also the most likely to take time away from earning to care for children and elderly parents.
The Gender Pay Gap
Unfortunately, this is still a major factor in why even financially savvy women simply don’t have as much saved as their male counterparts. Women still only earned 85% [link: https://www.pewresearch.org/fact-tank/2019/03/22/gender-pay-gap-facts/?mod=article_inline] of what men earned in 2018, yet the costs of living are the same.
So What’s the Fix?
Fortunately, while the facts and figures look bleak, there is a simple solution: effective and specific retirement planning. You must work with a financial planner who understands these challenges and works to combat them, as many don’t.
As women, we have a tendency to put everyone else in our lives first and ourselves last, which is what often leads us to pay for things like children’s college funds but struggle to cover living expenses in our retirement. This isn’t a sacrifice you need to make and when you put yourself first you will be in a far better position to take care of other people when the time comes.
Running out of money in old age is not inevitable, and effective sex-specific retirement planning is all it takes to protect yourself and those you love.
We know there aren’t many financial planners or advisers out there women feel they can talk openly to, but that’s exactly why WeRise was born. We offer financial planning for women by women, and it’s our purpose to ensure we tackle these challenges and set you up for a long, happy, and healthy retirement. To talk to us about securing your financial future, simply click here.