5 Facts That Threaten Women’s Retirement Income and 4 Ways to Overcome Them
In this day and age where women are advancing in careers and business ownership, and experiencing success their predecessors only dreamed of, they still lag behind men in one key area: saving and planning for a financially secure retirement.
Women are at risk of experiencing a financial shortfall in retirement. In other words, they risk outliving their money.
The five primary economic and social factors that threaten the financial security of women in retirement are:
- Women’s lifetime income is less than men’s due to the fact that they take time out of the workforce to care for loved ones. Which means they don’t get to enjoy the financial increases over the life of their careers that men do.
- Women tend to work part time – or not at all – in order to stay home with the kids.
- Therefore they contribute less to retirement savings and earn less Social Security benefits, which translates into lower retirement income.
- Statistically, women outlive men, which means they need more money to live.
- Because women live longer, their cost for healthcare (i.e. long term care) is more than men’s.
As pervading as these factors are to women’s financial security, there are ways to mitigate them.
Here are four ways women can improve their financial security for retirement.
- Start saving as much as you can for retirement. Take advantage of workplace retirement plans. Visit your HR department and arrange to begin payroll deductions. If you already contribute, increase the amount.
- Start saving after tax dollars as well. This way you can create tax-diversity in your retirement income. The last thing you want is to have all of your income be at the mercy of future tax rates.
- Take a look at your monthly expenditures to determine where you can find more money to save. Make a decision to cut way down on expenses today in order to save more for your future. Your future self will thank you profusely.
- Get educated about retirement planning for women. Learn about all the various ways you can save for retirement and make your retirement savings last longer. Even if your husband “handles all the finances.” Like anything else, two heads are better than one. If you’re a single gal, find a financial professional you feel comfortable with and let them help you create a plan.
Advisors Will Be Extinct in 5 Years Unless…
I’ve had financial advisors for more than 40 years. Not once in those years have I called my advisor to find out what stock/funds I should buy or sell. But I have called to find out where I should get my first mortgage, when to sell my house, or how much income I could get in retirement.
In short -- and I think I’m pretty typical – I was looking for financial advice, as it relates to my life.
Here’s the disconnect, what most advisors do is simply manage their clients’ assets. They determine what to buy, and what to sell, they think about risk management, about growing their practice by finding new clients and about getting paid.
Historically that has been the business model. But as more women take control over financial assets, they, like me, will be looking for a different experience. And unless the financial community is willing to change ….. advisors, as they are today will be extinct in five years.
Advisors who want to survive will have to do a lot more than just manage money – they will have to provide genuine “advice”. That means doing what’s right for the client, not pushing product and pretending it’s advice.
Women especially, but all investors generally, are becoming more and more cynical. They says, “If I want advice about reducing my debt, that’s what I want and not ‘here’s more debt’ because that’s what my advisor gets paid for! And if saving taxes is what I want then saving taxes should take precedent over selling me a product.”
You may be thinking that spending your time providing advice isn’t lucrative but the reality is that in the long run – it pays off in spades. The advisors who take the time to build real relationships with clients, who provide advice as it relates to their clients’ lives, even when there is no immediate financial benefit to themselves, those who don’t simply push product – are the ones who over time have the most successful practices.
Generally women understand and value service, but they will say, “If I’m paying, I want to know what I’m paying for: Is it for returns? Is it for advice? Is it for administration? I want to know. Then I can make up my mind what’s worth it and what isn’t.”
Investing is becoming a commoditized business and technology is replacing research that no one else can find. Today the average advisor is hard pressed to consistently beat the markets, and with women emerging as the client of the future, unless they start providing real advice, their jobs will likely be extinct in five years.
- 1 of 1143