Women Need to Save More for Retirement Than Men
Women are often afraid of outliving their retirement savingswith good reason. American women live about seven years longer on average than men, and that can mean seven more years of retirement that need to be financed.
Here are some steps women can take to plan for a financially secure retirement.
Participate in a retirement plan. Women are more likely than men to participate in a retirement plan, at least among full-time, year-round workers ages 21 through 64. Some 56.4 percent of women were enrolled in a retirement plan in 2005, according to the Employee Benefit Research Institute, compared with 53.7 percent of men, although both groups' participation was down from 2004. "Women are in professions that are more likely to offer a retirement plan such as the public sector or a large corporation," explains Craig Copeland, an EBRI senior research associate and author of the study.
But among all workers, including low-income and part-time workers, men outpace women by 1 percentage point in retirement plan participation. Copeland says women earn less than men overall and aren't as likely to work full time, both factors that lead to lower participation.
Plan on outliving your husband. "Retirement is a women's issue because they are the people who live longer in retirement and who run the risk of running out of money," says Mathew Greenwald, president of the research firm Mathew Greenwald & Associates. "In a lot of families there's enough money for the life of the husband but not for the wife." Not only do women live longer than men, but they also tend to marry older men. The combination means that women need to finance more years in retirement.
Trust, but verify. Some 45 percent of women and 65 percent of men say that the man takes the lead in retirement planning, found an Allstate survey of people born between 1946 and 1978. Aside from that difference of opinion, a man doing the planning may not know what his wife wants out of retirement. Some 54 percent of women but only 39 percent of men say they know a great deal about what their spouse wants to achieve in retirement. "Women have confidence in their partners," says Greenwald. "But when you look at what they have done, they shouldn't be that confident. They should talk more about it."
Talk to your spouse. Many couples said talking helped get their retirement plans on track. The Allstate survey found that 48 percent of women and 58 percent of men said a simple conversation was all that was needed to get their partner to take a specific action regarding retirement planning. Many women had made sure their spouses had adequate life insurance (84 percent) and a will (54 percent). "After age 45 it's important to try to decide what type of lifestyle you want, how much it will cost each month, and how much you have to have set aside to be able to afford that," says Greenwald. "It's very important for women to make sure that conversation happens."
Conversation starters. Greenwald suggests that neutral topics can help start the conversation about retirement, such as filing taxes, reviewing life insurance coverage, or making decisions about employee benefits. It may be helpful to frame the discussion as a positive conversation. "Say, 'I was thinking about our retirement, and we could have a great retirement,'" says Greenwald. "But we need to do some planning to make sure it's all that we hope it to be."
Plan to go it alone. The Allstate survey found that 48 percent of women have considered the financial implications of living alone in retirement, compared with 36 percent of men. Yet only 32 percent of women are planning for retirement separately from their spouse or partner, although many women invest money separately from their spouse (49 percent) or maintain a separate savings account (42 percent).
Don't underestimate how much you need to save. Men (23 percent) are more likely than women (13 percent) to believe that they need to accumulate at least $1 million for retirement, according to EBRI, while more women (37 percent) than men (24 percent) think that less than $250,000 will provide for an adequate retirement. But many financial advisers think women actually need to save more money for retirement than men. "Women need to be more cautious and set up a plan that allows that money to last many more years than a man would," Copeland says.