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How Women Can Manage Retirement Challenges

By Jane Young, CFP, EA

American women are taking a larger role in household finances and control 70% - 80% of all consumer spending. They control over half of the personal wealth in the United States. Although women have made significant strides, they face many unique challenges in preparing for retirement and attaining financial security.

Generally, women feel less financially secure, knowledgeable, and confident about the retirement process than men and they are more likely to experience financial anxiety. Only 12% are “very confident” they will be able to retire comfortably. Women over sixty-five are 43% more likely to live below the poverty line than men of the same age.

As a whole, women earn less than men and they are more likely to assume the role of caretaker. Numerous studies have found that current median earnings for women who work full time is 82% of what men earn. Women are more likely than men to leave their career or reduce their hours to care for children or the elderly. This dramatically impacts long term income potential and career momentum. It also negatively impacts their Social Security benefit, pension benefits and the amount they can save for retirement. Women will spend about 27 years in the workforce compared to 40 years for men.

Additionally, women live about three years longer than men. A 2019 study by the National Center for Health Statistics found that the average life expectancy for men is 76.1 years and 81.1 years for women.  It is common for women to marry older men which compounds the likelihood of eventually being on their own.

Many women tend to focus more on day-to-day financial issues rather than long term finances. They are less prepared for retirement, only 68% are contributing to a retirement plan verses 81% for men. Many women are uncomfortable, intimidated or uninterested in their personal finances.  

Women tend to be conservative investors and are more hesitant than men to invest in the stock market.   A conservative portfolio will not earn the long-term growth needed to build a retirement nest egg. This may be due to a lack of financial knowledge and confidence. Only one in four American women invest in the stock market.

To become better prepared for retirement, educate yourself about investments, retirement planning and the impact of staying out of the workforce. Women often place too much focus on taking care of others rather than themselves. Take care of yourself, focus on the future, and prioritize saving for your retirement. Establish automatic contributions to your retirement plan to pay yourself first. Invest at least enough to earn your employers match and work toward maximizing your contribution.

Be an active participant in the investment and planning process. If you share finances, work with your partner to fully understand your financial situation and set financial goals. Work together on decisions regarding when to start Social Security benefits, survivor benefits on pensions, beneficiaries, and insurance to ensure both of you will be secure on your own.