10 Obstacles to Womens Retirement Goals
May 11, 2012 1:08 PM
Mothers Day Reality Check: 10 Obstacles to Womens Retirement Goals<br><br>
For Mother’s Day, millions of American women could use the gift of solid retirement planning. But before offering investment advice, wealth managers need to know the challenges women face.
And while women today are more financially independent than they were in previous generations, far too may are still financial unprepared (in general and in comparison to men) for retirement.
Not only do women live longer than men, they often are the sole caregiver – or assume that role following a divorce – for their children, a responsibility that, according to a recent MetLife survey, comes with an average price tag of $324,000 in lost wages, lost Social Security benefits and other lost opportunity costs over their lifetimes.
Here’s a closer look at 10 of the biggest challenges women of all ages face saving and investing for retirement.
Sources: ING Retirement Research Institute and the Society of Actuaries.
And while women today are more financially independent than they were in previous generations, far too may are still financial unprepared (in general and in comparison to men) for retirement.
Not only do women live longer than men, they often are the sole caregiver – or assume that role following a divorce – for their children, a responsibility that, according to a recent MetLife survey, comes with an average price tag of $324,000 in lost wages, lost Social Security benefits and other lost opportunity costs over their lifetimes.
Here’s a closer look at 10 of the biggest challenges women of all ages face saving and investing for retirement.
Sources: ING Retirement Research Institute and the Society of Actuaries.
1. Savings Disparity<br><br>
Data from the ING Retirement Research Institute’s Retirement Revealed study demonstrates this gap in retirement savings between genders. Across generations, with the exception of the age 50-64 age range, men tend to contribute higher percentages of pay to employer retirement savings plan.
Over time, given lower absolute average incomes for women, these percentage/contribution gaps can lead to significantly lower lifetime retirement savings for women, who will likely need more in savings to fund longer lives in retirement (with a corresponding increase in the likelihood of high medical costs).
Forty-two percent of women demonstrate retirement savings contributions at the lowest levels (between 1% and 5% of annual income) compared to 34% of men.
Over time, given lower absolute average incomes for women, these percentage/contribution gaps can lead to significantly lower lifetime retirement savings for women, who will likely need more in savings to fund longer lives in retirement (with a corresponding increase in the likelihood of high medical costs).
Forty-two percent of women demonstrate retirement savings contributions at the lowest levels (between 1% and 5% of annual income) compared to 34% of men.
2. Barriers to Savings<br><br>
Seventy-eight percent of women reported some type of barrier to saving for retirement compared to 69% for men.
For both genders insufficient income is the most cited reason, followed by high level of debt in roughly similar measures. Women, however, are more likely to report that not knowing what my options are is a significant impediment to retirement saving.
For both genders insufficient income is the most cited reason, followed by high level of debt in roughly similar measures. Women, however, are more likely to report that not knowing what my options are is a significant impediment to retirement saving.
3. Being Divorced or Widowed Doesnt Help<br><br>
The "insufficient income" and "debt" barriers to saving are strongest for divorced and widowed women. At the same time, divorced and widowed women are less likely to report uncertainty about their retirement savings options.
4. Women Struggle With How and How Much<br><br>
It can also be hard to save for an elusive goal. 42% of women (vs. 31% of men) agree that they dont know how to reach my retirement goals. Not surprisingly, understanding how to reach retirement goals increases with age.
While 45% of women younger than 50 dont understand how to reach retirement goals, that drops to 36% of women age 50-64 and just 23% (but still nearly one quarter!) of working women age 65-69.
And, two thirds of women (64%) have never tried to calculate how much they may need to (hopefully) reach their retirement goals; fully three quarters do not have a formal financial plan in place.
While 45% of women younger than 50 dont understand how to reach retirement goals, that drops to 36% of women age 50-64 and just 23% (but still nearly one quarter!) of working women age 65-69.
And, two thirds of women (64%) have never tried to calculate how much they may need to (hopefully) reach their retirement goals; fully three quarters do not have a formal financial plan in place.
5. Women Want and Expect More Retirement Information From Employers<br><br>
Half of all women expect their employers to help them better understand their retirement goals and how to reach them (vs. just 44% of men). Single women, who are less likely to know how to reach their retirement goals, also have the highest educational expectations of their employers.
6. Women Say They Have More Immediate Concerns<br><br>
Insufficient income may also be the root of more immediate financial risks for women. Almost one quarter (23%) of women, but just 16% of men, are especially vulnerable to unexpected financial emergencies, and do not have any amount of emergency financial reserve.
That jumps to nearly half of women (48%) with one months salary or less in reserve (but just 36% of men). Only 28% of women (but 35% of men) have the recommended six months salary or more in emergency reserve.
That jumps to nearly half of women (48%) with one months salary or less in reserve (but just 36% of men). Only 28% of women (but 35% of men) have the recommended six months salary or more in emergency reserve.
7. But Most Women Have The Right Financial Priorities<br><br>
Reducing debt is the clear primary short-term focus for 54% of women. Vacations, at 14%, are not the short-term financial priority for todays working women, but slightly gain in importance for older women.
For 25% of women, improving their emergency savings is a #1 short-term financial goal... and that emergency fund is more important to divorced and widowed women (30%) than to those who are married or single.
For 25% of women, improving their emergency savings is a #1 short-term financial goal... and that emergency fund is more important to divorced and widowed women (30%) than to those who are married or single.
8. Women Have Less Discretionary Income Than Men<br><br>
Women are slightly less likely than men to have discretionary income after their regular bills are paid, and slightly less likely to direct those funds to additional savings, retirement or otherwise. On the other hand, they are roughly equally likely to use extra funds for entertainment, nice things or vacations. Younger and single women are most likely to use discretionary income for enjoyment.
9. Regardless of Gender or Marital Status, Retirement is Important to Everyone<br><br>
Taking the longer view, retirement is the top priority for everyone, regardless of age, marital status or gender. 57% of both men and women overall rank retirement as their primary long-term goal. Not unexpectedly retirement increases in importance with age.
Still working full time, with a mean retirement savings of $189,000, women age 65-69 may be especially pessimistic about ultimately being able to leave the workforce. Debt, for these older women, may also get in the way of retirement. 31% of women age 65-69 more than women in any other age group say that paying off debt is their most important long-term financial goal; just 22% of men in this age group report the same.
Paying off debt, for women, increases in importance as a long-term goal with age. For men, that focus on debt remains more stable, and is lower at every age.
Still working full time, with a mean retirement savings of $189,000, women age 65-69 may be especially pessimistic about ultimately being able to leave the workforce. Debt, for these older women, may also get in the way of retirement. 31% of women age 65-69 more than women in any other age group say that paying off debt is their most important long-term financial goal; just 22% of men in this age group report the same.
Paying off debt, for women, increases in importance as a long-term goal with age. For men, that focus on debt remains more stable, and is lower at every age.
10. Good News/ Bad News Scenario for Women<br><br>
In the past half-century, life expectancy for newborn American males improved by an average of almost two years each decade, from 66.6 years in 1960 to 75.7 years by 2010. For females, the average increase was about 1.5 years per decade, from 73.1 years in 1960 to 80.8 years by 2010.
On average, that’s five more years women will need additional retirement savings and investments to ensure they live out their golden years in style.
On average, that’s five more years women will need additional retirement savings and investments to ensure they live out their golden years in style.
