Women in Retirement

What is the Financial Outlook for Women Planning for Retirement?

The gender landscape across American industries is evolving. Today, women continue to make up nearly half of the workforce in the United States. 1^United States Department of Labor, Women’s Bureau, Labor force participation rate of women by age, 1948-2016 annual averages They own more than 12 million businesses 2^"2018 State of Women-Owned Businesses Report,” Commissioned by American Express. 2018 and are the sole or primary breadwinners for 42 percent of families with children under 18. 3^Center for American Progress, “Breadwinning Mothers Are Increasingly the U.S. Norm,” by Sarah Jane Glynn. 2016

But, as women experience growth in their professional lives, what is their financial outlook for life in retirement, and are they prepared for it?

Women in Retirement Factors: Longevity

One factor that women should consider is longevity. The Social Security Administration’s data shows women are living longer than men. A woman who turned 65 in 2019 can expect to live, on average, until age 86.5. For men, that average age is 84.0. 4^Social Security Administration, “Benefits Planner/Life Expectancy”

In fact, people are having longer life expectancies overall. The administration reported about one of every 65-year-olds today will live longer than age 90, and approximately one out of seven will live past age 95. 4^Social Security Administration, “Benefits Planner/Life Expectancy”

If you plan to retire in your mid-sixties, that’s potentially 30 years of living expenses and other essentials that need to be taken into consideration.

Women in Retirement Factors: Sandwich Generation

Women could encounter additional obstacles and challenges that factor into their financial planning for retirement. Some of them might fall into the category known as the “sandwich generation.” 

This generation is an emerging family dynamic where middle-aged Americans are trying to save for retirement, while also trying to care for both children and aging, elderly parents. 

It is estimated nearly half of adults in their 40s and 50s have a parent age 65 or older and are either raising a young child or financially supporting a grown child. 5^Pew Research Center, “The Sandwich Generation: Rising Financial Burdens for Middle-Aged Americans.”2013 This could put a financial squeeze on some households, especially where women are the main breadwinners or providers.

Women in Retirement Factors: Gender Gap

Another challenging factor for women as they financially prepare for retirement is the gender gap. Some women may choose to leave the workforce or take an extended leave of absence to raise children or care for elderly relatives. A potential consequence of this is fewer years in an employer-sponsored retirement account.

A Bank of America/Merrill Lynch and Age Wave study found 54 percent of women surveyed took a leave of absence after becoming a parent, compared with 42 percent of men. 6^Bank of America/Merrill Lynch and Age Wave, “Finances in Retirement: New Challenges, New Solutions,” 2017

Many women could be making this workforce decision in their late 20s to mid-30s, which leads to the issue of the gender pay gap. According to the National Bureau of Economic Research, between ages 25-45, the gender pay gap for college graduates, which starts close to zero, widens by more than 50 percent before narrowing again as women near retirement. 7^National Bureau of Economic Research, “The Dynamics of Gender Earnings Differentials: Evidence from Establishment Data” 2017 (Using Census Bureau databases, 1995 to 2018)

Even at the highest executive level, gender parity issues are still prevalent in the workforce. A 2020 Global Gender Gap report from the World Economic Forum showed the U.S. has only 21.7 percent of women in companies’ board of directors. The two top countries were France and Iceland with 43.4 percent and 43 percent, respectively. 8^World Economic Forum, “Mind the 100 Year Gap” 2020

Tips for Closing the Gap 

Women can focus on closing this income gap by joining and contributing to employer-sponsored retirement plans. They can also take full advantage of matching programs that can be a path to catching up on lost time or income. Additional safe-money options are available for alternative income solutions that offer tax deferral, without contribution limits and allow for expedited nest egg growth.

Here are five helpful ways women can start to save more for retirement.
1. It’s never good to procrastinate, especially when it comes to your retirement finances. The earlier you start to plan for retirement, the better off you will likely be. 
2. Take the time to do your research and find the retirement income options that are right for your individual needs. 
3. Plan out your budget, including building or automating savings into it.
4. People are living longer. Calculate what you might need for potentially 30 years in retirement. 
5. Money and retirement income don’t have to be taboos that women are afraid to talk about. Your long-term financial health is important and should be openly discussed, whether it’s with a spouse, family member or trusted friend. 

Preparing for Lifetime Income 

For both men and women, the No. 1 goal of working pre-retirees is securing lifelong income. 9^IALC, “Retirement Readiness Survey.” 2018 If you have concerns about longevity and finances in retirement, a variety of retirement insurance products are available that are specifically designed to ensure guaranteed income for life, which may offer increased liquidity options under qualifying circumstances.

Safe money options like fixed index annuities can offer lifetime income options that protect years of hard-earned dollars and can generate a stable source of income that cannot be outlived.

Retirement goals are unique and individual needs vary from woman to woman. Talking to a qualified financial professional can help identify a long-term plan and options that will work best for you.

  

 

Footnotes

The independent speaker in this video is not an employee or representative of American Equity Investment Life Insurance Company® (American Equity) and does not necessarily represent the views or opinions of American Equity.
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