Addressing women’s unique concerns

Health care was another concern. While 69% of men and women worried about not having enough money to pay for adequate health care, and 63% worried about paying for extended nursing care, 57% of the women surveyed worried about being able to afford long-term care in retirement, compared with just 47% of men.

Women’s worries about retirement are well-founded. On average, they earn 77% of what men earn and spend 12 years less in the workplace, largely due to care-giving responsibilities.

As they age, more women than men are alone. Between ages 65 and 74, for example, 46% of women are alone, versus 22% of men. From 75 to 84, the split is 65/28, and by age 85, it’s 86/45.

As a result of their earnings and work experience, women accumulate less lifetime income and, consequently, have lower retirement savings. In fact, women’s median retirement income is 58% of men’s. Rising health care costs, inflation and increasing life expectancy all contribute to the challenges of doing more with less.

While retirement is obviously on the minds of women, awareness is not action. So what should women and their advisers do to address these issues?

For one, women should be encouraged to save more. The Society of Actuaries report found that 86% of pre-retirees believed their financial security in retirement would be enhanced if they had they made contributions to investments for three more years than they did.

Even those workers covered by company pension benefits should be encouraged to save outside the plans, because often company benefits may not be sufficient, benefit plans are subject to change and job security is not guaranteed.

Advisers can really help in the area of risk management, especially in longevity risk. Outliving assets is a very serious issue. While average life expectancies are in the 80s for women of retirement age, some will live to over 100, and life expectancy generally is increasing. It’s important to organize a client’s portfolio so that part of it contains retirement assets that provide income that won’t be outlived, and to plan for how the portfolio will provide for protection against inflation, health care costs and long-term-care costs.

Possibly the most important asset for many families — the home — generally is not thought of as a source of retirement funding. Only 18% of pre-retirees have plans to use home equity to help finance their future retirement.

And while everyone focuses on risks in retirement, let’s not forget pre-retirement risks like disability, which can seriously impair earning potential and retirement savings, if not eat into capital earmarked for retirement.

For these risks, protection products that should be considered include immediate annuities and other payout products, disability coverage, health coverage and long-term-care coverage.

One retirement risk that is often erroneously minimized is widowhood. Most women outlive their husbands, often by 15 years or more.

Financial risks are magnified for women who have experienced the loss of a spouse.

However, when asked about the financial implications of their husband’s death, nearly 60% of women surveyed indicated their financial well-being would be “about the same,” showing a lack of awareness concerning the financial effect of widowhood.

Many women experience a significant drop in economic status at widowhood. In fact, about 40% of widows have no significant income other than Social Security. According to the official poverty threshold, a single person requires nearly 80% of the income needed by a married couple. Yet the Social Security benefit paid to a survivor typically is between 50% and 67% of what the couple received.

Too often, the focus of pre-retirees and retirees is on investment management rather than on balancing investment management and risk. With the help of financial advisers, women approaching retirement can work to allay their concerns and feel more confident about their future.

Anna Rappaport is a consulting actuary and president of Chicago-based Anna Rappaport Consulting at annarappaport.com.

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