Why Retirement Planning is Different for Women

by | Mar 12, 2021 | Financial Wellness

Most women are likely to have independent responsibility for their finances at some point in their lives, whether it be before, after, or in lieu of marriage. However, many women are not actively involved in their own retirement planning.

In the past, societally accepted gender roles led to more men planning the household finances, while women focused on other responsibilities. This outdated way of thinking is one contributing factor to women ages 65 and older being more likely to face poverty than men of the same age. The fact is, retirement planning is different for women, and in marriage, both members of a couple should always be involved in planning their financial future.

How is retirement planning different for women?

There are several differences between men and women when it comes to retirement planning. These differences, however, should not discourage women from being actively involved in the planning process.

More women than men still maintain the role of primary caregiver within a family, whether it be caregiving for young children or for older parents. Women situated in an active caregiving scenario generally have less time to work and therefore miss some opportunities to contribute to their retirement.

In addition, women who are the primary bread winners in a family must contend with a documented wage gap in the workforce. With working women earning 82 cents to every dollar earned by men on average, and with women holding close to two-thirds of the outstanding student debt in the United States, women are generally at a disadvantage when it comes to retirement planning. When analyzing these factors, the numbers indicate that women realize about 70% of the income that their male counterparts enjoy.

Finally, with the life expectancy of women significantly outlasting men, the time to start planning is now. The Social Security Administration notes that women’s life expectancy has reached 86.5 years, while men can expect to reach only 84 years of age. While 2.5 years doesn’t seem like much, a lack of financial stability during those final years could have significant ramifications. Another factor that women shouldn’t overlook is higher health related expenses during retirement, as men can expect total healthcare costs around $133k while women are estimated to spend $147k.

Why is it especially important for women to talk about retirement planning?

According to the Department of Labor, women are more likely to have held part-time jobs that do not qualify for a retirement plan during their lives. Recent years, however, have offered opportunities for women to gain much ground in the workforce, securing positions which allow them to smash through glass ceilings that once were commonplace in positions of power.

For most women, reaching financial independence is not a sprint, but a marathon that includes both short-term and long-term spending and savings goals. In the immediate future, it might be necessary to secure cash to prepare for the unexpected, while the long-term goals are focused on planning for your specific needs later in life and during retirement.

How can women become more financially independent?

Financial professionals generally recommend keeping three to six months’ in expenses saved in an emergency fund. This step is critical to preventing financial distress during unexpected times, like the COVID-19 pandemic. Also, strive to pay down outstanding debts, especially those with higher interest such as credit cards or installment loans. Doing this can create space in your budget that you can use to increase your savings and investments in the future.

For long-term targets, be sure to contribute early and max out your company-sponsored retirement account. This will help you to realize the maximum benefit of compounding interest. You should also contribute to an additional IRA or other tax advantaged savings account whenever your situation allows for it.

In thinking about your retirement expenses, consider housing and basic needs in addition to your goals for retirement, like travel or other leisure. And don’t forget, with women typically living longer than men, it is important for women to prepare for a longer retirement and pay special attention to planning for long-term care expenses.

Take the first step to a secure retirement and contact Brookstone Wealth Management.

Unfortunately, women often display a sense of conservatism when it comes to discussing their finances, their investments, or their retirement plan. There could be many reasons for this, from upbringing to lack of confidence in their financial knowledge. After all, speaking to a financial advisor can be compared with getting financially naked, and this type of openness can create anxiety for some. On the other hand, some studies have found that women are more likely than men to meet with a financial advisor, but despite this fact, women are still less likely to begin investing.

At Brookstone Wealth Management, we offer a complete suite of Wealth Management services for individuals and families, supported by an experienced team of financial and legal professionals. We are owned and led by women, and we focus on coaching, teaching, and mentoring our clients.

Get started with Brookstone Wealth Management by contacting our team today, and don’t forget to follow our page on social media. We look forward to helping you navigate your True North.