Challenges Women Face Preparing for Retirement

A couple weeks ago, we had the opportunity to present to a women's leadership group within a large corridor organization.  We were tasked with presenting the basic framework of how one might improve their financial position, prepare for retirement and provide solutions and tools to assist in that endeavor. Knowing we were presenting to a group of women, we felt compelled to discuss the unique realities women face as they prepare for retirement and life during their “golden years.”

Many remain unaware, but women in general face unique challenges as they begin their careers, prepare for and live through their retirement. These realities hit close to home, as we have spouses in the workforce and I have a 17-month-old daughter at home who will eventually be a career woman.

What are these realities you ask?

Generalizing of course, women tend to have to save more than their equivalent male counterpart to have the same amount of assets at the time of retirement. Presented differently, two new college graduates enter their first job earning the same starting salary and will retire at the same future date. One is female the other male. The table below illustrates the difference in annual savings required for both individuals to attain the same amount of assets at retirement. Our industry has coined this the “gender retirement gap.”

Source: Garnick, Diane, “The Longevity Challenge: Preserving Health, Income, and Standard of Living Through Extended Retirement” CFA Institute. March, 07 2017. < The Longevity Challenge: Preserving Health, Income, and Standard of Living Through Extended Retirement>.

Source: Garnick, Diane, “The Longevity Challenge: Preserving Health, Income, and Standard of Living Through Extended Retirement” CFA Institute. March, 07 2017. < The Longevity Challenge: Preserving Health, Income, and Standard of Living Through Extended Retirement>.

Contributing factors include societal norms, gender pay gap and risk tolerances. More specifically, women spend less time in the workforce, (although improving) women earn less than equivalent male counterparts and women tend to be more risk aware and thus assume less risk with their portfolios.

What we have touched on thus far only relates to preparing for retirement, but actual retirement presents another set of challenges for women. During retirement, women tend to spend more. This is largely due to the reality that women live longer than men. Moreover, women tend to spend more on healthcare and are the sole providers during late stages of retirement.

From an advisor vantage point, it is important to plan for these realities. I am not referring to the need for you to walk into an insurance office to purchase long-term care insurance, I am referring to the need to address these realities as you plan for retirement and if you’re in retirement, plan to have accelerating expenses during the later stages in life. Improper planning may result in significant impairments to income expectations in retirement and worse, depletion of assets during your late stages in retirement.

The full presentation can be accessed below: