Why Women Have to Think and Plan Differently For Retirement

For many, retirement security is challenging. If you want to consider a financial security “perfect storm,” think no further than the challenge facing millions of women as they approach retirement. 

Consider the facts:

• Entering retirement, one would want to have the largest retirement nest egg possible. However, women face a gender gap in wages, earning only eighty-one cents for every dollar earned by men.¹
• Women often spend less time in the workforce due to caregiving responsibilities.
• Longevity Risk from longer life expectancies means women’s retirement income must last longer.
• Women face a “confidence gap” and greater anxiety about discussing money and planning for retirement.²
• Divorce and a spouse’s death hit women harder financially. Women's household income, on average, fell by 41 percent with divorce, almost twice the size of the decline that men experienced.³
• Women are more likely to live alone, as 80% of men die married, increasing financial strain and financial management burden.

Earning less, spending less time in the workforce, having greater caregiver responsibilities, and facing the more serious financial consequences of divorce are some challenges women face as they prepare for retirement. These circumstances result in women entering retirement with lower retirement savings and smaller Social Security benefits, as well as living potentially longer lives with higher health care costs.

The key to meeting these challenges is proper income planning. This begins with choosing an income distribution strategy to address them. Without a strategy, retirement security is threatened. I’ve talked about various strategies in The One Mistake That Can Ruin Retirement and Retirement Withdrawal Strategies: Systematic vs. Bucket and how each, in its own way, strives to provide a solution to these challenges.

Remember, any strategy, whether systematic withdrawal, risk wrap, income protection, or time segmentation, is superior to no strategy. In retirement, income, not wealth, determines the quality of life. As you think about your particular situation in preparing for retirement, the priority should be choosing an income distribution strategy that outlines a method for sourcing retirement income while addressing the unique challenges facing women in a way that resonates with you!

¹Source: www.payscale.com/data/gender-pay-gap, 3/31/2020

²Source: MarketWatch, How to plan for the unique financial challenges women face, 3/23/2020

³Source: Source: U.S. GAO, Women Still Face Challenges, 7/19/2012