No doubt women have made significant progress in controlling their own financial destiny. Yet despite those advances, they still lag men in retirement savings by a wide margin.
Women now control 27 percent of the investable assets worldwide and more women out-earn their husbands (29 percent in 2009 versus 18 percent in 1987), reports the Insured Retirement Institute (IRI) in a recent study, “Women and Retirement: Overcoming Retirement Income Challenges Facing Women.”
Yet because women are more likely to take more time out of the workforce for caregiving duties, women save between 25 percent and 30 percent less than men for their retirement over a 30-year period. That’s compounded by a persistent wage gap that sees women earning 80 cents for every $1 a man does, according to the IRI, citing the U.S. Bureau of Labor Statistics.
IRI president and CEO Cathy Weatherford said in a release detailing the study that those lost wages lead many women to hit “a retirement income glass ceiling” that limits their ability to fund their golden years in comfort.
Among the report’s findings:
- While half of boomer men have saved at least $200,000 for retirement, only 35 percent of boomer women have put away as much.
- About a third of baby boomer women say they do not know when they will retire, and 43 percent expect to retire at age 65 or later.
- Only four in 10 women age 55 and older believe they have done a good job planning for a financially secure retirement, while a quarter say they have little to no confidence in how they have shaped their retirement plans thus far.
Forty-four percent of boomer anticipate that Social Security will be a major source of their retirement income. And more than a third (38 percent) of boomer women say a defined benefit (DB) plan will provide most of their retirement funds.
But with fewer private-sector pensions, boomer women again face a deficit in funding a secure retirement. The IRI points to a 2010 study from the Employee Benefits Research Institute that found only 17 percent of women age 65 or older received income from a private sector defined benefit plan.
According to IRI’s research, 42 percent of boomer women envision a defined contribution (DC) plan contributing the lion’s share of funds for her retirement. But even with a DC available at work, women are under-saving. Using a study from Vanguard, the IRI report notes that in 2011, the average DC account balance for a woman was $59,104 compared to $94,063 for a man.
Women, the report points out, face two major challenges in retirement: increased longevity (an average of three to four years longer than men) and higher health-care costs. According to the IRI report, a 65-year-old woman can expect to pay 13 percent more than a man for health-care expenses, including premiums, during retirement. Women are more likely to need nursing home care as well.
Opportunity for Advisors
However, according to the IRI report, only a third of baby boomer women are confident they will have enough money to fund their health-care expenses during retirement, compared to 41 percent of boomer men.
Even in light of the shortfalls, more than half‑53 percent‑of boomer women have not consulted a financial advisor, the IRI report reveals.
When looking for retirement income products, women favor guaranteed income each month (18 percent), recommendations by a financial advisor (17 percent) and rate of return (15 percent).