As American women near or enter their retirement, many of them are finding that their finances through their twilight years are not likely to be what they expected. Many seniors live in poverty, but the poverty rate for women over 65 is nearly double that of men.
Although the financial crisis in 2007 highlighted these concerns, the truth is that they date back much farther than that. Many women struggle with retirement planning, but Baby Boomer women in particular are under-invested in their retirement for several reasons.
Women Were Primary Caregivers
Many women were, or chose to be, the primary caregivers for their family. Social Security payments in retirement are determined in part by how much a person made during their working career.
Women who worked traditional jobs in a limited capacity, or who just didn’t work outside the home, can only draw based on their spouse’s retirement benefit.
Career Choices (and Pay) Were Limited
In the last 10 years, there has been a substantial change of dynamics in the modern workplace. More and more women have specifically penetrate office jobs and business positions
When women did work outside the home, their options for careers – and therefore for pay – were limited. This limited social security contributions, but it also restricted the options for women to get into the sorts of careers where pensions and retirement plan contributions were the norm.
Even if women did enter these sorts of careers, they probably did it at a later age, and therefore had fewer benefits.
Less Participation in Employer Retirement Programs
Even when employer retirement plans were an option, fewer women participated. The reasons for this are unclear; since women’s income was often treated as supplemental in two adult homes, it may be that women simply didn’t consider a retirement plan as necessary.
Women Historically Were Not Responsible for Long Term Financial Planning
As with any stereotype, this does not hold true across all families, but in many situations, women managed the day to day budget while men were responsible for the long term financial planning.
Women in this situation were somewhat at the mercy of their spouses to make sure that enough money was saved for their retirement years. If their spouse was not a good financial manager, they may be in a tight spot now.
How Do Women Recover From These Difficulties?
Even though women may be nearly at the age when they would retire from the workplace, that doesn’t mean they’ve lost the chance to make meaningful contributions to their retirement income. A few steps that women can take immediately to try and improve their financial situation during retirement:
- Begin contributing to an employer’s plan. If a woman is currently working for an employer who offers a 401k or other retirement plan, she should begin contributing to that plan immediately.
- Consider alternative investments. If a woman has extra income that she can afford to invest, looking for alternative investment opportunities may help her get a great return on her investment at the same time that she is able to move forward with certain goals or values. This helps her feel good about her investments as well as more financially secure.
- See a financial planner. If a woman has some money invested, or has some extra funds, it’s worth speaking to a financial planner to make sure that they are as appropriately invested as possible.
- Use a free online calculator to figure out how much you should be saving. Too many people guess, and will most often underestimate their retirement costs. By using a calculator that determines your most advantageous contribution, you can make sure that your financial situation is as healthy as possible.
Some saved income will be better than none, and depending on her situation, she may be able to contribute extra amounts (catch-up savings) through her employer. Her employer may also match some portion of those funds.
Finding the right mix of stability with ability to improve earnings is difficult for the layperson, while a financial advisor has the skills and experience to help make sure that funds are appropriate managed.
Because of their societal position over time, women often struggle to make sure their retirement years are comfortable. Add to this that women often outlive their spouses, and there can be real difficulties in making sure that women can support themselves throughout their later lives.
Women may end up relying on their children to help them make ends meet, which may place a drain on their children’s lives. If a woman is nearing retirement age, she may struggle to make up the difference in what she could have saved over her life, but she still may be able to save something that will help over the rest of her retirement.
