When it comes to retirement planning, hesitating hurts women more than men, because women live longer, are more likely to be single in old age, face lower income along with greater healthcare costs, and often have added caregiving responsibilities.
Meanwhile, men are more likely than women to take the adequate steps toward financial security in retirement. But importantly, women who take charge, do the math, plan for contingencies, and work with their partners and/or financial advisors have a better chance of securing their finances in retirement than those who shrink from the process, according the recently released MetLife Mature Market Institute's Study of Women, Retirement, and the Extra-Long Life: Implications for Planning.
"The combination of risks for women and their relatively inadequate retirement planning has become known as the 'perilous paradox,' but the message is clear that women are able to avoid that," says Sandra Timmermann, director of the MetLife Mature Market Institute. "The risks and costs of 'living long and living female' call for an affirmative action plan."
Longer life spans for American women (8 percent longer than men, on average) are accompanied by a number of additional costs and financial constraints that can lead to greater financial challenges in retirement.
As of 2009, women age 65 and older had significantly lower annual retirement incomes than men: $21,500 versus $37,500. Women spend more on healthcare since they pay greater attention to their health, and tend to have less adequate insurance. Women provide more long-term care to others (parents, spouses), costing them in lost wages, Social Security benefits, and pensions. They are more likely to need long-term care themselves, with a lifetime cost of $124,000, nearly three times that of men ($44,000), according to data from the institute.
The study examined the thinking and practices of mature women, ages 50 to 70, in the context of the "extra" challenges they may experience in retirement. According to the report, women expect to live until age 85, some until age 90, and are more concerned than men about affording healthcare, long-term care, and outliving their assets. Yet slightly more than half of the women surveyed know the likely amount of their retirement income/assets, and only 44 percent have calculated the amount of their essential expenses.
Further, approximately 16 percent said they have or plan to delay retirement by, on average, four years. The survey covered just over 1,000 men and women between the ages 50 and 70 with $50,000 or more in household income and $100,000 or more in investable assets.
Among men and women, men are more likely than women (65 percent versus 55 percent) to calculate retirement income.
The report and gerontology experts say the data suggest that women who work collaboratively with spouses, partners, financial advisors, and even knowledgeable friends report higher confidence in their retirement security. More than half of the women (54 percent versus 44 percent of men) report that they are very or somewhat concerned about outliving their retirement resources. Of women who were at least somewhat confident about their ability to live comfortably in retirement, 66 percent attributed this to having a guaranteed stream of income (70 percent of males concurred). Of those not confident, 61 percent said they lacked sufficient savings to last their anticipated lifetime (58 percent of males agreed).
This year, AARP launched its campaign "Decide. Create. Share." It is designed specifically for women in their 40s, 50s, and 60s to take charge of their long-term needs and desires. The program, including resources and real-life testimonies on AARP's website, covers several areas: One example is of a mother who opted to adopt in her 40s; she's worried about the financial strain of her care on a son that will likely have his immediate family's expenses to contend with as she reaches her golden years.
"For themselves and their families, women can do a better job of taking charge, planning for contingencies, gathering information, calculating their income/expenses, and getting serious about retirement strategy," says Kathryn McGrew, research fellow at the Scripps Gerontology Center at Miami University. "Their spouses and partners can do their part by engaging in a joint strategy that serves the interests of both parties with various retirement scenarios. They should give particular consideration to the fact that most women will outlive their spouses."
Some steps to consider:
• Take charge. Women should be aware of gender-longevity differences and their implications and seek not generic, but gender-specific, information and advice. Couples should work together on information gathering and calculations but should break out those calculations for each gender.
• Plan for contingencies. Have a Plan B, including accounting for expenses like long-term care and the health costs related to a woman's longer life. Consider the implications of "cashing out" resources prematurely, like retirement plan benefits, guaranteed income joint-and-survivor options, and Social Security benefits.
• Act now. The most affirmative action is timely action. Act now, as if your (later) life depends on it.
Financial Planning for Women: Retirement Calculator (AARP)
What Today's Woman Needs to Know and Do: The New Retirement Journey (MetLife Mature Market Institute)
What Every Woman Should Know (Social Security Administration, U.S. Department of Health and Human Services)