As a financial adviser with a 90-year-old mother who I helped deal with the affairs of her 92-year-old sister, I’m acutely aware of the women’s retirement crisis.
I was listening to Sallie Krawcheck on Morning Joe a few years ago as she highlighted that the face of nursing homes was decidedly female. I saw this first hand when my aunt moved from her home to a nursing home when the in-home care from my cousin was no longer enough. My aunt and my mother were from the generation that benefited from Social Security and pensions. As you know, things have changed. Let’s look at the issues that many women face today.
Women’s retirement and the downside of living a long healthy life
For quite some time women have lived longer than men of the same age. Many women, such as my mother, married men who were older than themselves. My mom was 7 years younger than my dad and she has already lived 14 years past the age my father was when he died. If the projections hold, she will live 17 years without the additional financial resources that my dad brought from a pension and Social Security. My aunt lived 29 years after her husband died! She had no children to help care for her.
Few financial professionals I know actually work with someone who is calculating what their potential healthcare and long-term care expenses will be in the future. My mom was blessed to have great healthcare. I know that is not the case with many seniors who must balance paying for medications against living expenses. Regarding long term care, I know from my aunt and mother they would much rather live at home than be in either assisted-living or in a nursing home. As an only child with grade school age children, I am not an option for providing in-home care for my mom. What are your options for long term care? Do you have a child or other family member who is planning to assist you if you remain in your home?
Single women’s retirement and the downside of living a long healthy life
There are many women who remain single their entire lives. My wife’s aunt is one example. She does not have the additional income that would come from having a husband that worked outside the home. This further multiplies the economic impact of the 78% gender-based wage gap that many women face. Single women do not receive any survivor benefits from pensions, etc. They’re all on their own. Terry Savage, speaking at Money Smart week in Chicago, highlighted that potentially the most challenged women in retirement are those who are 60+ without a spouse, life partner or children. Who will care for them when the need arises? There is a huge need for estate planning, healthcare powers of attorney for healthcare and property, as well as directives and letters of instruction, etc. during your life. Do the research now before it’s necessary.
When taking care of others impact women’s retirement
Women often find themselves in and out of the workforce to either have children or take care of aging parents. This easily affects the calculation of their individual Social Security benefit, affording them less money after retirement. Many women get divorced. If you are married for less than 10 years, you aren’t able to receive benefits based on your ex-husband’s Social Security. If you do remarry, you will forfeit the Social Security benefits from your first husband and potentially not get any benefits from your next husband. These factors make planning for a woman’s retirement that much more challenging. Popular calculators don’t effectively address women’s retirement issues. These tools use straight-line calculations such as income and rate of inflation.
Women’s retirement planning is different
I believe that many of these issues can be addressed. First start by assessing what you want based on your resources. I agree that women and men should make the same amount of money for the same job but the wage gap persists so we must compensate for that. Despite having higher wages, men aren’t necessarily saving enough to maintain their lifestyle in retirement. It’s popular for planning specialists such as CFPs to target an 80% replacement rate of your last year’s salary. Let’s say you make $100,000. Would you feel comfortable living on $80,000? This assumes that certain expenses you currently have will be gone once you retire, like a mortgage or reduced expenses like dry cleaning. You may be similar to some of my clients who replaced some expenses with new expenses, like travel. Because of these new expenses, and despite lowering some of their expenses, they actually required more than 80% for their retirement lifestyle.
I find that most people benefit from some level of custom planning. For many, the biggest challenge is sticking to their plan. While many people hold their investment advisor accountable for achieving investment return targets, they don’t hold themselves accountable for hitting their savings goals. You may find it beneficial to get several of your friends with similar situations to work with a common advisor so you can benefit from the behavioral support of one another. The road may be rocky at some point, so it’s great when others can have some shared level of experience.
Don’t delay planning. The cost of waiting includes higher rates of savings, needing to take on more market risk, retiring later, or worse, compromising your retirement lifestyle. Find a financial adviser that is sensitive to women’s retirement issues and can address your particular needs. A Chartered Retirement Planning Counselor or a Certified Financial Planner™ has the training and experience to aid you in your research and planning to overcome those retirement risks and help navigate your path to a smooth retirement.
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