It’s well-known that boomer women will outlive their male counterparts. The September 2011 MetLife Study of "Women, Retirement, and the Extra-Long Life: Implications for Planning" reports that for women who have survived to age 60, the average remaining life expectancy is 23.8 years, to about age 84. Men’s life expectancy is shorter: 20.6 years to about age 81.
Implications for women
But what does the longevity gap mean from a financial planning perspective? In many cases the extra years add additional financial challenges for boomer women, according to the MetLife findings. These challenges include:
• Much higher health-care expenditures with over half of their higher total expenditures attributable to their longer lives.
• Being more likely to provide long-term care to others. The time spent away from the workforce providing this care can lead to lost wages, lower Social Security benefits and reduced pensions.
• An increased chance of needing long-term care for themselves. The study notes "women’s purchased long-term care averages $124,000, nearly three times the total cost for men ($44,000)."
• Significantly lower annual retirement incomes than men: "The average retirement income from all sources for men (age 65-plus) in 2009 was $37,509; women’s income was just 57 percent of that amount, or $21,519."
An unmeasured risk
Some risks can’t be measured in a survey, however. Barb Pietrangelo, CFP, CLU, ChFC, is a financial planner with Prudential in Grand Rapids, Mich.; roughly half her clients are boomer women. She notes that another potential risk is that these clients can be too generous in providing financial support to others. "They tend to be very concerned about their family and because of that they tend to help children or parents more than most, even to their own detriment," she says.
To reduce that risk, Pietrangelo has been counseling clients to budget their gifts. That strategy helps clients control the amounts given away and keeps their finances on track. There are emotional aspects to intra-family gifts, of course, but Pietrangelo reminds clients about their need for financial independence. "There are no scholarships for retirement," she says. "One of my favorite lines is the only person that’s going to take care of you when you’re an older woman is the younger woman you are today."
Implications for advisors
The MetLife study found that women recognized many of these challenges and were concerned about the adequacy of their retirement resources: "...more than half of the women (54 percent versus 44 percent of men) report that they are very or somewhat concerned about outliving their retirement resources. And fewer women than men (13 percent versus 23 percent) are ‘very confident’ that they and their spouses/partners will have enough money to live comfortably if they live to age 85-plus."
These concerns create a natural clientele for advisors who understand boomer women’s financial challenges and the stats show the market is only partly covered. About half of women and men (51 percent and 49 percent) use a financial planner; about one in four women and men (23 percent and 25 percent) use other professionals (i.e., attorney, accountant); approximately one in six (15 percent of women and 16 percent of men) have attended planning lectures or seminars.
"One of my favorite lines is the only person that’s going to take care of you when you’re an older woman is the younger woman you are today." Barb Pietrangelo, Prudential
The MetLife study is available online at www.metlife.com/mmi/research/women-retirement-extra-long-life.html#findings.
How do boomer women view their retirement? Here’s what they told MetLife in its September 2011 study, Women, Retirement, and the Extra-Long Life: Implications for Planning.