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Tuesday, September 16, 2008
Is Retirement Different for Women?
By Sheyna Steiner
Bankrate.com
Some strides have been made toward gender equality since women won the right to vote in 1920. But men and women aren't exactly equal when it comes to retirement.
Women are more likely than men to spend their golden years in poverty. According to a report from the Women's Institute for a Secure Retirement, more than one in 10 women in retirement live on less than $10,000 a year.
The reason is attributable to financial physics: Women earn less than men over their lifetimes and live longer.
"This is not a complicated picture. And it's not a pretty picture," says Jim Toedtman, editor of the AARP Bulletin.
Women are risk averse
It's not that women don't worry about retirement. A recent study from the Society of Actuaries, "Risks and Processes of Retirement
Survey Report," found that women are more anxious than men about that time of their lives.
"The actuaries found that women are more concerned about the risks," says Anna Rappaport, consulting actuary and chair of the Society of Actuaries' Committee on Post-Retirement Needs and Risks. "Fifty-seven percent of women are concerned about being able to afford long-term health care compared to 47 percent of men."
Also, in investment matters, women are risk-averse by nature.
"Women tend to be more conservative investors," says Phyllis Silverman, vice president of PNC Wealth Management and director of Women's Financial Services Network at PNC.
But women know they should be saving for retirement -- and they are doing so.
The 2008 Retirement Confidence Survey by the Employee Benefit Research Institute found that employed women were almost as likely as employed men to contribute to an employer-sponsored retirement plan.
Similarly, Bankrate's retirement survey found that women were just about as likely to have a retirement plan as men, with roughly two-thirds of each gender saving in a tax-advantaged account specifically for retirement. (Men did come out ahead by about 5 percentage points, however, with 68% owning an account versus 63% of women.)
Women are less confident
In Bankrate's survey, men expressed more optimism about their future retirement comfort than women, with 34% believing they
would have more than enough money, compared to just 20% of women.
Mary McGrath, Certified Financial Planner and vice president at Cozad Asset Management, believes it may come down to a question of self-confidence.
"In general, the male clients I see a lot of times just think that whatever it is that they want to achieve, they can do it. When I'm dealing with women, they don't have the self confidence to think that they can actually do it," she says.
Her experiences may be generationally biased though, she says. "The clients that I see this in are a little bit older -- maybe in their 60s or 70s."
Women are too giving
In many respects, retirement planning for women looks the same as retirement planning for men.
"There are no special mutual funds for women. There is no insurance policy for women.
"The difference is the need," says Patrick Astre, Certified Financial Planner and author of "This is Not Your Parents' Retirement." "We find that women have a greater need to engage in financial planning than men."
Certain characteristics endemic in the female population conspire against them when it comes to investing. For instance, they tend to take care of everyone else in the family before considering their own needs.
As an example, says PNC's Silverman, "Women are more likely to feel like it's more important to save for their children's college."
Rappaport concurs. "When they are taking care of kids or parents, they are probably quicker to say, 'I will use the money for someone else and not use it for myself.'
"We are not saying that women should think about going to the beauty salon, but saying, 'Think about your long-term security and retirement and make sure you have resources for your retirement,'" she says.
Women are disadvantaged at work
Cultural forces don't favor women in the retirement savings arena either.
"Women make less money than men. It's unpleasant, but a fact of life," says Astre. "There is also a glass ceiling; women often don't get as many promotions as men."
Whether women are paid less than men due to poor salary negotiating, career choices or institutional biases, the end result is that they not only have less to save but their Social Security payout is less. They put in fewer years at work and lose out on years of paying into a pension or defined contribution plan.
On top of everything else, most women have children during vital career-development years.
"If you drop out of the work force to take care of children, that is probably going to be a time in your late 20s or early to mid-30s, when your male colleagues who stay in the work force are getting promotions and climbing the ladder," says Ginita Wall, CPA, CFP and co-founder of WIFE.org, a nonprofit organization dedicated to providing financial education to women.
For women who choose to take time out to raise children, losing those working years means that they return to the work force at the same level they were at years before, maybe even with obsolete skills -- putting them further behind in their careers and savings.
"That means you'll be earning less and will have lost crucial years that you could have been adding to your 401(k) and earning years of service that would get you a higher return," Wall says.
Women are stuck with more chores
Women who continue to work while caring for children often find themselves in the unenviable position of being the babysitter,
house cleaner, cook and laundress in addition to their full-time jobs. And that leaves less time to contemplate investments
or retirement planning.
Astre had a couple as clients who had differing levels of involvement in their workplace retirement plans. The husband was very involved in his, while the wife had no idea where her contributions were going.
"In my office, she turned to her husband and said, 'You get home from work, you sit on the couch, open a beer and that's the end of your day. I've got to make dinner, do the laundry, take care of the kids and go shopping,'" says Astre.
"And it's true. Meanwhile I felt guilty -- that's what I do at home."
Women are short on savings
Even though women today have more opportunities to guide their own financial ships, not all are taking the helm. Research
and anecdotal reports from financial planners report that many women, whether single or married, are not adequately preparing
for their own retirements.
A study from the Retirement Security Project, "Retirement Security for Women: Progress to Date and Policies for Tomorrow," compared the retirement accounts of men and women and found that women's accounts reflect about half or less of the balance of men's accounts on average.
Women are ambivalent about finances
In her experience, Certified Financial Planner Nancy Gardner has found that a significant portion of married women of all
ages cede control of their financial future to their husbands.
"They find finances boring so they just let their husbands handle it," she says.
Single women of all of ages also take an avoidant and slightly delusional approach, she says.
"They think that they will never have the money to retire, so they don't want to think about it," she says.
"I have actually had people tell me when I ask what their retirement plan is, and they tell me in all seriousness, 'Marry well,'" Gardner says. "And that is all age categories. It is really sad."
The antidote to the gender-specific retirement conundrum comes down to instilling a financial education and, apparently, a healthy dose of self-sufficiency in women.
A study by Prudential titled "Financial Experience and Behaviors among Women" found that women who have been preparing for their financial future feel less stressed about retirement than those who are way behind or who haven't started yet. Only 10% of the prepared women report that they worry often about the future compared to 53% of the other group.
Even more compelling evidence that women should actively manage their finances came from a study by Northwestern Mutual with LLuminari in June 2008.
The study found that health and happiness correspond with financial security.
Women who set financial goals and took steps to reach them reported less stress and were more confident and optimistic than those who didn't.
Women are facing better times
Younger women should have it easier than the generation that spawned the baby boomers; more women are in the work force now
than ever before.
"For the older generation, their lives went like this: They got married and the man said, 'Don't you worry your pretty little head about anything. I'll take care of everything,'" says Astre.
"I had one client that didn't even drive. Her husband would take time off to take her shopping -- didn't even drive!" he says.
No matter what their age, women have to take responsibility and get involved.
Ideally, everyone should start early, says Rappaport.
Even stay-at-home moms have the chance to save money in a qualified plan. Their working husbands can contribute up to $5,000 in a spousal IRA in 2008.
Women are relationship-oriented
Women who are disinclined to hit the books for some financial education should visit a financial adviser for some advice.
Fee-only Certified Financial Planners can offer objective suggestions for planning your financial future.
Watch related video
A recent study by Cogent Research, "The Female Equation: The Impact of Gender on Investment Attitudes and Behaviors," found that women were much more likely than men to rely on a financial adviser and they tend to be happier with their advisers than men.
"Women are more process-oriented, women are more relationship-oriented," says Silverman. "They will often select a financial adviser, but take a long time to find the right one because trust is a critical component."
Advisers can help with goal setting and determining how much you should be saving for retirement.
In Bankrate's retirement survey, 41% of female respondents said they had not figured out how much money they would need for retirement versus 33% for males.
Conversely, more women than men had gone to financial advisers to find out how much money they should save -- 32% to 22%.
Poll respondents who did use a financial adviser were much more confident about having enough money to retire in comfort.
If more women took responsibility for their retirement planning, their golden years might seem a little bit brighter.
The knight in shining armor could still show up, but everyone should have a backup plan firmly in place in case he doesn't.
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