With an estimated 70 million retirees expected by the end of 2030, the challenges and disparities in retirement savings and financial advice have become increasingly evident. Women, in particular, face unique retirement challenges, often lagging in savings and encountering obstacles in accessing quality financial advice.
Several external factors contribute to the retirement disparities faced by women. Maternity leave, for example, may play a substantial role in retirement planning. Data from the Department of Labor reveals that maternity leave is, on average, three times longer than paternity leave. This situation means that women are typically forced out of the workforce longer than men and risk income shortages, loss of promotions and bonuses, and potential losses in retirement savings. Recent findings by the Pew Research Center indicate that as much as 25% of women who took leave due to childbirth or adoption experienced negative impacts on their careers, compared to 13% of men.
Another factor increasing retirement planning challenges for women is longevity. Women tend to live longer than men in the United States and globally. An extended lifespan poses a considerable risk in retirement planning, as women are more likely to outlive their spouses. The possibility of living longer means women must plan for more years in retirement, including ensuring they have enough for unanticipated healthcare needs, long-term care, and living expenses.
Due to care giving responsibilities, women with access to pensions and employer-sponsored retirement plans may also experience reduced time in the workforce. The Mercer CFA Institute Global Pension Index notes that women are more likely to work part-time while caring for a spouse, parent, special needs child, or other loved one. Many women working in caregiver capacities opt for self-employment, which often lacks retirement savings options and other benefits.
The COVID-19 pandemic further exacerbated financial challenges for women retirees. Many women aged 50-64 had to skip medical care, prioritize others’ healthcare, or reduce necessary prescriptions to save money. This situation led to poor physical and mental health outcomes, including increased loneliness, social disconnection, and financial instability.
Is the gender gap a factor?
Many retirement researchers claim that the “gender gap” contributes to the disparities in retirement outcomes between men and women. On average, women earn only 84% of what men earn, meaning there is a 16% gender pay gap. When you add this gap to other factors like motherhood, the gender gap results in one in five mothers passed over for career-advancing work assignments or promotions. These socio-economic factors perpetuate the gender gap, affecting women’s retirement planning and financial confidence. A study by the Administration on Aging indicated that older men had a higher median income than women, further impacting women’s confidence in their retirement savings.
Overcome your retirement challenges with a few simple actions.
If you’re a woman encountering retirement planning issues, you should seek the help of a financial professional. Look for someone experienced in the many nuances of financial planning for women and empathetic to their unique situation. While you could find a robo-advisor to give you fast, automated investment advice, you may not get answers to more complex situations requiring customized solutions.
A financial professional with the proper training and skill sets can help you navigate retirement and develop strategies that mesh well with your goals, needs, and risk tolerance. Your financial advisor, whether a man or woman, must operate as a fiduciary and put your needs ahead of any commissions they receive. The right advisor will have the training, experience, and collaborative mindset necessary to design the most comprehensive plan possible.
Your advisor should also encourage you to improve your financial literacy to make sounder, more informed money decisions. Many American women experience financial stress due to lacking essential money knowledge. Have your retirement specialist assist you in finding community resources and professional guidance. A solid knowledge base will do a lot to help you alleviate financial stress and improve your well-being.
An annuity can help some women overcome retirement obstacles.
Although often misunderstood, annuities can effectively address retirement income concerns for women, particularly women within ten years of retirement. Annuities come in various types, but they all offer tax advantages and the potential for guaranteed lifetime income in exchange for lump-sum or periodic premium payments. A fixed annuity protects your principal from market volatility and loss, provides a guaranteed return, and creates a reliable, predictable income stream. Modern annuities are customizable and flexible in contribution and payout options.
Surveys by retirement think tanks and research organizations indicate that a majority of women who say they are confident about their retirement futures own annuities.
Annuities offer women compelling reasons to add them as a vital component of their retirement blueprints. Annuities provide many features to make the transition into retirement smoother and more secure. Here are five reasons a woman planning her retirement might want to add an annuity to her retirement matrix.
1. The desire for a guaranteed lifetime income stream. A primary concern for women entering retirement is the fear of outliving their savings. An annuity effectively eliminates this worry by providing guaranteed income for life. When you place a lump sum in an annuity, you enter into a contractual agreement with an insurance company, ensuring you receive predictable payouts throughout your lifetime. Knowing you have at least one reliable income source to supplement Social Security can contribute to your peace of mind and help maintain your lifestyle when you stop working.
2. There’s a need for flexibility and personalization: Modern annuities have evolved to offer a broad selection of features, including long-term care provisions and inflation protection. The old-school days of one-size-fits-all annuities are long gone. Modern annuity products have higher customization, safety, and functionality levels than ever before. These improvements allow women to design their retirements and tailor their annuity choices to match their needs, goals, and relationship to money.
3. They want predictability. Many individuals, especially those approaching or already in retirement, seek predictability in their financial planning. Annuities excel in this regard by taking the guesswork out of income. An annuity can offer the desired stability and predictability for women who value knowing exactly how much income will be available when they retire.
4. Annuities are less “hands-on.” An annuity is one of the few financial products you can truly “set and forget.” Once you agree to the annuity contract terms, you can be sure of getting a steady income for life, even if you live another 50 years into retirement. There’s no need for constant adjustments, calling your advisor daily, or fretting over market fluctuations. With an annuity, you can enjoy financial security without needing ongoing management.
5. An annuity is tax-advantaged. Using an annuity in your portfolio’s “safe money” portion can yield significant tax benefits. This part of your nest egg grows tax-deferred, akin to funds in traditional retirement accounts. The advantage is that you may see substantial tax reductions in retirement, especially if you don’t need to access all the funds immediately. Annuities can be a tax-efficient way to safeguard your financial future.
Katie’s Comments:
Women will control a significant portion of the world’s wealth transfer in the coming years; addressing their unique retirement needs and providing them with financial solutions is crucial. Women’s retirement challenges are due to several external factors, such as motherhood, longevity, and the gender gap.
Financial professionals can help women navigate these challenges, and annuities offer a promising option to ensure a secure retirement income. By closing the gender gap and empowering women to make informed financial decisions, we can work towards a more equitable future for all retirees. It is essential to recognize the interests and needs of women in retirement planning and provide personalized, goal-oriented advice to ensure financial security and peace of mind in their retirement years.
In addition to these five compelling reasons, various other benefits are associated with annuities, making them a valuable tool for retirement planning. While annuities may not be the ideal solution for everyone, they are worth consideration. Working with an annuity specialist can help you explore these safe money alternatives more thoroughly, allowing you to determine if they align well with your financial situation.
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