By Peter Mastrantuono
Only 12% of women are “very confident” that they will be able to achieve a financially comfortable retirement, while over half of all women expect to work past the age of 65, predominantly for financial reasons, according to a recent survey by Transamerica’s Center for Retirement Studies.
Behind the Gender Gap
In one illustration of the retirement gap that exists between men and women, a study by Bank of America found that the median retirement savings for men was $100,000, but only $30,000 for women. There are a number of reasons why this retirement preparedness gap exists between the sexes. Chief among them are that women:
- have a longer life span;
- have lower incomes, on average, than men;
- are more likely to suspend working for extended periods of time to care for family (e.g., children, aging parents);
- tend to invest more conservatively than men; and
- devote less time to planning for their retirement.
While some of these reasons may be bound up in larger societal issues over which women have limited control, there are, nonetheless, many steps that women can take to proactively improve their retirement outlook.
Addressing the Retirement Gender Gap
In the same Transamerica survey cited above, only 15% of surveyed women had a written retirement strategy and even fewer women said that they frequently discuss saving and investing issues with family or close friends.
Fuzzy goals (like “a comfortable retirement”) combined with a lack of planning have rarely accomplished much, whether the arena is business, sports or retirement. That’s why creating a clear goal and developing a blueprint to achieve that goal is an essential first step for women to gain control over their retirement future.
Once a goal has been set and a plan has been developed, women must take it upon themselves to learn more about savings and investing because, whether due to divorce or outliving their spouses, women will at some point in their lives become solely responsible for their financial security in retirement.
There are other ways to close the gap, including:
- Taking advantage of all employer plan savings opportunities, especially if an employer offers matching contributions.
- Creating a budget and finding ways to reduce spending so that funds can be directed toward retirement savings.
- Investing in long-term assets, like high quality companies, which can provide potential for growth of capital.
- Engage in retirement discussions with other women to learn from them. Perhaps even consider starting a “retirement discussion group” that meets monthly to discuss important retirement topics.
Finally, according to the Transamerica survey, more than 6 in 10 women do not use a financial advisor to help them plan, manage and invest for their future retirement. Enlisting a professional advisor with experience in retirement planning may, in the end, be the most important step women can take to achieving a financially secure retirement.
Peter Mastrantuono is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Peter worked for over 30 years in the wealth management industry, focusing on retirement planning, investing, asset allocation and financial planning.
