Retirement Planning for Women Should Consider Differences From Men

Women make less money and live longer than men, yet they accumulate less wealth to fund their longer lives, notes a study from Merrill Lynch in partnership with Age Wave.

The study shows that women are confident—equally as confident as men—in most financial tasks, such as paying bills (90%) and budgeting (84%); however, when it comes to managing investments, their confidence drops significantly. Only 46% of Millennial women reported having confidence, more than half of Gen X (52%) and Baby Boomers (54%) said the same, and 60% of women in the Silent Generation reported having confidence in investing.

Forty-one percent of women report that their biggest financial regret is not investing more. Fifty-nine percent of women report that they are not doing a good job using investing as a way to pursue their financial goals. Women say that not having the knowledge to invest is their number one barrier (60%), followed by not having the confidence (34%). All women surveyed wish they had more education around money and finance, with 87% saying basic financial management should be a standard part of the high school curriculum.

For the women who do invest, however, most (77%) report feeling they’ll be able to save enough money to last them the rest of their lives.

However, 70% of women surveyed contend that the financial services industry has traditionally catered to men. Financial planning models have defaulted to men’s salaries, career paths, family roles, life spans and preferences. As an example, the study report says, retirement calculators do not allow for planned or unplanned breaks from the workforce—breaks taken more frequently by women—to raise children or care for aging family members.

In addition to knowledge about investing, women need education about their longevity. According to the report, longevity needs to be a factor in everyone’s financial planning, but far more so for women, who, on average, live five years longer than men. Nearly two-thirds of women (64%) say they’d like to live to 100, yet most (60%) fear they will run out of money if they do live that long. Forty-two percent are afraid they will run out of money by age 80.

The report says women’s fears are not unwarranted. A prior Merrill Lynch/Age Wave study found the typical retirement costs $738,000, yet only 9% of American women have $300,000 or more saved. When asked, “How far into the future have you planned for financially?” one in four women ages 18 or older, and as many as 30% of women ages 30 to 44 say they have not planned at all for their future.

The study report also points out that women’s life journeys are also different than men’s. “Women’s life journeys through early adulthood, parenting, elder caregiving, retirement and spousal caregiving necessitate financial planning for lifelong security and peace of mind,” the report says.

Other financial challenges women need to plan for are work interruptions and health care costs. Work interruptions for providing care and part-time employment can limit access to employer-sponsored retirement plans. The study estimates that women will have earned a cumulative $1,055,000 less than a man who has stayed continuously in the workforce, due to the accumulated lifelong pay gap and workforce interruptions The report suggests women could get a retirement bonus if they invest in their employer-sponsored retirement plan early and delay retirement.

Age Wave estimates that the average woman will have 39% higher health costs than the average man in retirement, paying an additional $194,000. This is because women retire earlier, live longer and are more likely to spend years alone and have to rely on formal long-term care in their later years.

The report suggests that the financial industry, employers and policy makers, among others, can make an impact by respecting women’s different life journeys and longer life spans, acknowledging they are not all the same, encouraging financial discussions, facilitating financial education and confidence, and demanding equality in pay and promotions.

The survey was fielded October 25 through November 22, 2017, among 3,707 respondents, including 2,638 women and 1,069 men older than 18, across all geographies and education, income and asset levels. The survey report may be downloaded from here.