03 Mar 3 Biggest Hurdles for Women In Retirement
Are you wondering how long you will need to work until you can retire? If you are a woman, that number may be a little different than you think. Women face unique financial hurdles that should be taken into account when planning for retirement. The following information can help you keep your financial planning on track.
Women Live Longer
Women typically outlive men. On average, women will live five years longer than men in their lives. This is great news if we are talking about enjoying your post-work chapter of life. The drawback is that you will need to make sure that your income will also last the extra five years. Additionally, women are likely to encounter more health care costs during that time.
This means that you will need to save more money during your wealth accumulation years. You may also need to work longer to make sure that you do not outlive your retirement plan. The challenge is that women tend to retire earlier than men. Therefore further shortening the amount of time they have to accumulate wealth. In Nicole Maestas’s study, “The Return to Work and Women’s Employment Decisions,” she found that many married women retire before or at the same time as their husbands, even though their husbands are two or three years older. These women should be working longer than a man who started working at the same time she did to account for the longer life expectancy.
Women Tend to Save Less Money for Retirement
There are several reasons that women tend to save less money for retirement than their male counterparts. The societal expectations for women are a large factor in this equation. Women typically have more stopgaps in their careers than men. This can lead to a reduction in wealth accumulation opportunities. As women are still considered primary caretakers for their families, they are the ones who will leave the workplace to raise families, care for aging family members, and retire early to care for their spouse.
In financial matters, women tend to prioritize the needs of the family above their own. Instead of prioritizing wealth accumulation for retirement, women will put money in their children’s college funds, pay down debt, and build emergency funds. According to Marie Gooch, vice president at The Hopman Group, “Women are providing financial assistance to kids or grandkids, and aren’t focusing on their own future.” Marie emphasized that although those were all reasonable savings goals, “It is important to put on your own ‘oxygen mask’ before trying to help others.”
The Impact of Social Security on Retirement Income
Women, penny for penny, earn less than men. According to data from the Census Bureau, in 2016, women earned about 81 cents on the dollar compared to men’s salary for the same job. This gender pay gap, in turn, becomes a retirement income gap. Because women earn less money or are more likely to take years off of work during their careers, they have lower Social Security benefits when they retire.
Divorce can also have larger consequences for a woman’s retirement income than a man’s. A woman who divorces later in life may not only experience a loss of additional income, benefits, and assets, she is now solely responsible for her bills and savings. This can make it more difficult to prioritize saving for retirement.
How Financial Planning Can Overcome These Hurdles
Talking to a financial advisor when you are in your early 40s can help ensure that you are on the right track to meeting your retirement goals. A financial advisor can help determine if you should be more aggressive with your retirement savings to make up for work stoppage gaps or early retirement plans.
Taking the time to talk to a financial advisor, no matter what your age, can reduce the anxiety you may have concerning financial matters and help you develop a retirement plan that is unique to your lifestyle and your retirement goals. Every situation is unique, and we can develop a financial plan together. Listen to our weekly podcasts here.
Schedule a chat today with the Hopman Group to start charting your retirement path.