Top 5 Reasons Why Women Face More Risk in Retirement

It’s apparent that Americans, both women and men, have not saved enough money for retirement. Studies have increasingly indicated that many baby boomers have no financial plan in place to protect themselves against outliving their assets and the rising cost of health care should they live longer than expected. So what makes women so much more vulnerable than men?

1. Longevity. It’s a phenomena seen in every population: women live longer than men by four to five years. At first, people tried to explain this fact by saying that men did more dangerous things and therefore died younger. Men ride motorcycles, don’t see the doctor regularly and take more risks. Realistically, these explanations didn’t explain much. It seems women just live longer. By age 85, there are roughly six women to every four men.
2. Caregiving. Women are not only caring for their children, but they are also caring for aging parents. Overwhelmingly, women feel it is their duty to care for aging parents, but few plan for it. And women often don’t realize the emotional and financial toll that caregiving can take. For generations, women have been expected to be wives, mothers and community volunteers. In fulfilling these roles, they are supposed to be cooperative, supportive, understanding, and gentle while providing service to others. The costs associated with these stereotypical roles is further exacerbated by the caregiver’s inability to focus on a more lucrative career.
3. Income Inequality. The submissive view of women still affects them in the workplace. Despite the volatility in men’s earnings during the recent recession, men still out earn women by a large margin. In fact, the typical male worker with a bachelor’s degree earns about $5,000 more than the typical female worker with a graduate degree. The total number of women in management, business, financial, and service occupations has increased, but their real earnings in these sectors have not kept the same pace. Maternity leave, balancing home and work, and limited ability to travel are also considered challenges to women’s rise in management.
4. Education Misconceptions. It is important to realize that in order to tip the scales toward women in the workplace, there has to be a change in the perception of women, not in their qualifications. Over the past decade we have seen dramatic increases in the education level of females, to the point where women now outnumber men in institutions of higher learning and graduate at higher levels than men. This means that women do not lack the credentials necessary for advancement in the workplace, but that organizations are simply overlooking women for higher-level positions.
5. Health Care Costs. Women, particularly Hispanic and low-income females, have been hit harder than their male counterparts by the weak economy and higher health care costs, according to a report released in May of 2011 by the Commonwealth Fund, a private foundation working to improve health care delivery. While rates of chronic conditions such as diabetes and high blood pressure are similar to men, women are twice as likely to suffer from headaches and more likely to experience joint, back or neck pain. These chronic conditions often require regular and frequent treatment as well as follow-up care.

Trends are changing. Regarding saving and spending, American women say they're making deep and permanent changes in their personal finances. An estimated 44 percent are saving and investing more, 31 percent have changed living arrangements to save money, and 24 percent have decided to postpone retirement.

What has motivated this transition? Is it the fear of ending up alone or dependent? Is it the changes in health care laws? Or is it simply that women are learning to enjoy the process of accumulating wealth and achieving success without the guilt and fear they traditionally experienced? 

Proper planning can help develop ways to adequately address these concerns and narrow the disparity of the risk associated with women outliving their assets before men.

FPA member Catherine M. Seeber, CFP^®, is a Principal and Financial Advisor with Wescott Financial Advisory Group LLC.