Women face hard retirement choices
By: Rodney Brooks, USA TODAY
Financial planners have long known that women face unique issues in retirement.
Women face a unique set of problems going into retirement, financial planners say. And they need to take some important steps to ensure that they have a successful retirement.
“Women face the reality of longer lives with fewer financial resources to fall back on,” says Debra Whitman, AARP executive vice president for policy, strategy and international affairs. “They are paid less than men on average — 77 cents on the dollar, which can add up to half a million dollars over a lifetime.”
And, Whitman says, women are more likely than men to move in and out of the labor force to raise children and care for older relatives, which typically reduces any pensions they may qualify for and makes it harder to build up a nest egg. “They need more than men, but have less,” she says.
But some say that the retirement industry has been slow to respond to the problems facing women as they prepare for retirement. “Women are hugely in need of good, sound advice,” says Lena Haas, senior vice president for retirement, investment and savings at E-Trade. “But women are feeling lost, intimated and frustrated by what they get from full-service advisers and full-service brokers.”
Some of the big issues for women in retirement:
• Longevity: Women simply live longer than men. “They are more likely to end up alone in old age, because women have longer life expectancies — two extra years for those who reach age 65 — and married women are often about three years younger than their male spouses,” says Whitman.
“The combination of longer lives and limited finances can put older women at risk,” she says. “Women need to save as much as possible, starting as early as they can. They should hold off retiring if they are able, in order to maximize their Social Security benefit and build up their nest egg. If they have savings, they should consider buying an annuity to ensure their resources last as long as they do. “
Nancy Coutu, co-founder of Money Managers Financial Group in Oak Brook, Ill., said women’s biggest fear, no matter what the income group is “they are terrified of being a bag lady, running out of money. How do I get income that I won’t outlive.”
• Women tend to invest more conservatively than men. “I faced some clients who have all their assets in cash, including their 401(k) accounts,” says Derek Gabrielsen, wealth adviser, at Strategic Wealth Partners in Independence, Ohio. It’s important to not to be overly invested in cash just because it’s safe, he says. “Recently, the market has been strong. It’s important as you head towards retirement to capture some of those gains.”
“These issues lead to two financial concerns: less savings and less Social Security benefits, when compared to their male counterparts,” says Wendy Weaver, portfolio manager at FBB Capital Partners in Bethesda, Md.
• Women are not comfortable with financial advisers. E-Trade’s Haas says women rated the financial industry dead last in a list of 60 industries — below used-car salesmen.
“Women have not been served well by the industry,” she says.
“Almost 80% of women in a survey say that they wish that financial advisers talked to them and asked them for opinions, and not just their husbands,” she said. “Even if she comes along, the woman is just sitting there. Lots of times they don’t have the paperwork. They feel like they are being talked down to.”
For those and other reasons women end up with lower savings and lower Social Security payments. Weaver says women need to do three things to overcome the obstacles.
• Have a retirement plan, preferably with the help of a financial planner.
• Protect your assets. Have an estate plan; review your health insurance; make sure your investment plan is not too conservative or risky; and consider long-term care insurance.
• Plan for more than the financial aspects of your retirement. “Retirement is so much more than finance,” she says. “It is a huge transition, a financial transition, an emotional transition, and a psychological transition. Even how you introduce yourself and what you do is different. Thinking about those things will help.”
Education is key, says Coutu. “A lot of women think financial planning is just for the wealthy. They don’t understand it’s for Middle America. They feel intimidated. The way of learning they are most comfortable in is a group. They would much rather go to a forum here there a women and learn, techniques and strategies.
“My mantra is save, save, save,” says Whitman. “Also, women (and men) should seek out financial education to help them make good decisions.”