In previous generations, women often focused their working years on caring for their homes and family. Therefore, they often relied on their spouses or possibly their children to provide for them during their retirement.
Now, women are more likely to have worked throughout their lives, and are more likely to be focusing on their own retirement funds. They may also choose not to marry or remarry, meaning that they are solely responsible for their maintenance income throughout the end of their lives.
Women make mistakes and face some unique challenges when it comes to saving for retirement.
Longer Lifespan
Women tend to have longer lives than men, according to the CDC. As medical science improves, the lifespan gap continues to increase. This means that, on average, women are likely to both outlive spouses and need to financially support themselves for several years longer than their male counterparts. This means they need to have more money saved overall.
Spouse Dying Without Life Insurance
Many women remain married into the end of their lives, but the lifespan discrepancy between men and women means that women are more likely to see their spouses die. Not enough people have and maintain life insurance, which means that women be left struggling to find the funds to bury their spouses. End of life medical expenses can also leave a woman struggling to make ends meet.
Length of Retirement
Because women are likely to live longer, their retirement may be longer than a male counterpart’s, especially if they plan to retire right at 65. This can force women to stretch their retirement funds out longer, and leave them more vulnerable to increasing costs as they age.
Caring for Aging Parents
Women are often the traditional caretakers as their parents age, and this can significantly harm both their ability to earn income and save for retirement. Fidelity Investments used the example of a woman who had to leave a job for three years in order to care for her ill mother. She lost three years of income ($287,000) and social security contributions ($63,000). She may also have lost out on contributions her employer may have paid into a 401k, as well as her own contributions. Age discrimination may also make it more difficult for her to return to the work force at a later time.
Some employers may allow for flexible working hours and work-from-home situations that make it easier for women to protect their income while still providing necessary care.
Supporting Grown Children
While women tend to lose income when they have children, the modern economy often sees adult children returning home to live with their parents. This can have different effects on the family situation.
In the worst-case scenario, children are unable to contribute to the household at all, leaving women to pay for their adult children’s living expenses as well as their own. In some situations, however, adult children are able to contribute to the household, leaving women with more income to save and more in-home assistance as they age themselves.
Women should carefully examine what they are able to contribute to their kids and protect themselves as much as possible.
Market Fluctuations
When the stock market crashed in 2008, it destroyed many retirement funds. Ongoing fluctuations in the market have made it clear that stocks and bonds are no longer the same solid investments they were. While many women continue to invest in these funds because they can generate significant returns, it will be important to remember that these returns are not guaranteed. Many analysts say that, over time, the market is less likely to be the income generator that it has been in the past.
Inflation
Inflation is a problem for anyone saving for a future purchase or use of their money. Inflation says, basically, that over time the same amount of money buys less. When women are planning their retirement, they need to remember that inflation will factor in. Costs will be higher when they go to use those funds than they are when saving.
There are choices women can make that can help mitigate these retirement threats. For example, they can:
- Stay at work as long as seems reasonable. If you’re still healthy and able to work at 65, it may not make sense to immediately leave the work force. If you don’t want to stay at the same job you’ve had, you might look for part time work in another field, or work as a consultant in the same field.
- Delay taking social security if you can. Social security funds should be looked at as an addition to your own saved retirement income. The longer you can avoid taking social security, the higher your monthly payments will be over time.
- Look for employers who allow for flex time and work from home situations when possible. This will give you the ability to take care of family and life situations as they arise without losing as much in your overall income.
While women do face unique challenges as they move towards retirement, these challenges can be mitigated with some planning. Women can enjoy their retirement years and be comfortable while they do it.
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