Women who take charge, do the math, plan for contingencies and work with their partners and/or financial advisors have a better chance of securing their finances in retirement than those who shrink from the process.
The MetLife Study of Women, Retirement, and the Extra-Long Life: Implications for Planning shows women face a number of unique risks - including longevity, aging single, lower retirement incomes, greater healthcare costs and added caregiving responsibilities - and have not planned adequately to address these concerns, leading to a significant shortfall.
The study examines the thinking and practices of mature women, ages 50 to 70, in the context of the “extra” challenges they may experience in retirement. According to the report, women expect to live until age 85, some until age 90, and are more concerned than men about affording health care, long-term care and outliving their assets. Yet, slightly more than half of the women surveyed know the likely amount of their retirement income/assets and only 44% have calculated the amount of their essential expenses. Approximately one-in-six (16%) reported that they have or plan to delay retirement, on average, four years.
The data suggests that women who work collaboratively with spouses, partners, financial advisors and even knowledgeable friends, report higher confidence in their retirement security. It shows that those who employ what is known as the “Three Cs” approach: Communication + Compatibility = Confidence, have better results. Among men and women, men are more likely (65% vs. 55%) to calculate retirement income.
“The combination of risks for women and their relatively inadequate retirement planning has become known as the ‘perilous paradox,’ but the message is clear that women are able to avoid that,” said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. “The risks and costs of ‘living long and living female’ call for an ‘affirmative action’ plan. We find that those who plan for a steady stream of income, along with some flexibility for the unexpected, are best prepared for what can be an extended future.”
The MetLife Mature Market Institute has also created a video featuring women who were asked about their retirement plans and concerns. These profiles illustrate the dichotomy between their aspiration of enjoying their retirement years and their fear of not being prepared financially, emphasizing the importance of immediate action. Click here for the video.
Kathryn B. McGrew, Ph.D., research fellow at the Scripps Gerontology Center at Miami University, said, “For themselves and their families, women can do a better job of taking charge, planning for contingencies, gathering information, calculating their income/expenses and getting serious about retirement strategy. Their spouses and partners can do their part by engaging in a joint strategy that serves the interests of both parties with various retirement scenarios. They should give particular consideration to the fact that most women will outlive their spouses.”
Longer life for American women (8% longer than men on average) is accompanied by a number of additional costs and financial constraints that can lead to greater financial challenges in retirement. As of 2009, women age 65+ had significantly lower annual retirement incomes than men, $21,500 vs. $37,500. American women are more likely to experience retirement alone since many never marry or are widowed or divorced. Women spend more on health care since they pay greater attention to their health and tend to have less adequate insurance. Women provide more long-term care to others (parents, spouses), costing them in lost wages, Social Security benefits and pensions. They are more likely to need long-term care themselves with a lifetime cost of $124,000, nearly three times that of men ($44,000).
More than half of the women (54% vs. 44% of men) report that they are very or somewhat concerned about outliving their retirement resources. Of women who were at least somewhat confident about their ability to live comfortably in retirement, 66% attributed this to having a guaranteed stream of income (70% of males concurred). Of those not confident, 61% said they lacked sufficient savings to last their anticipated lifetime (58% of males agreed).
The study recommends the following:
- Take Charge - Women who take responsibility for their retirement are in a better position to reduce the specific risks of being female. They should be aware of gender-longevity differences and their implications and seek, not generic, but gender-specific information and advice. Couples should work together on information-gathering and calculations. Note to men: If your spouse/partner are inclined to assume less responsibility for decision making in your household (or if one of you tend to dominate the planning), commit to equal involvement through shared information gathering and calculations.
- Plan for Contingencies - Have a Plan B, including calculations and details for various contingencies. Be sure they account for expenses like long-term care and the health costs related to a woman’s longer life. Plan for emergencies; don’t defer for “if and when they happen.” Consider the implications of “cashing out” resources prematurely, like retirement plan benefits, guaranteed income joint-and-survivor options and Social Security benefits. Note to men: Be sure your contingency plan accounts for the needs of your partner and that benefits and insurance account for your spouse’s life expectancy, assuring guaranteed lifetime income for both of you.
- Do Your Own Math - Calculating your needs and resources is the key to planning and saving enough assets. Make sure your income and assets will last your expected lifetime. Use gender-specific estimates and calculations.
- Act Now - The most affirmative action is timely action. Take a deep breath, consider your specific concerns and start planning with a variety of scenarios in mind. Act now, as if your (later) life depends on it. It does. Note to men: If you haven't taken into account the extra long-life of your spouse of partner in your retirement planning, don't delay. Now is the time to take action and to make any necessary adjustments.
The MetLife Mature Market Institute®
The MetLife Mature Market Institute is MetLife’s center of expertise in aging, longevity and the generations and is a recognized thought leader by business, the media, opinion leaders and the public. The Institute’s groundbreaking research, insights, strategic partnerships and consumer education expand the knowledge and choices for those in, approaching or working with the mature market.
The Institute supports MetLife’s long-standing commitment to identifying emerging issues and innovative solutions for the challenges of life. MetLife, Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 50 countries. Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. For more information, please visit: www.MatureMarketInstitute.com.