3 Things Women Need to Know About Retirement Planning

The vast majority of financial planning advice isn’t gender specific, but there are still a few important things women in particular need to know to help build a safe, secure, and well-deserved retirement fund.

1. Women Live Longer

There are no guarantees, of course, but the average American woman has a significantly longer life expectancy than the average American man. For girls born today that life expectancy is 81.2 years, while boys born today are expected to live only 76.4 years. Factor in that most women tend to marry men who are somewhat older than themselves, and it paints a picture of most women outliving their husbands by 5 years or more.

In fact, according to the Federal Interagency Forum on Aging Related Statistics, more than half the women over 65 are widows, and they outnumber widowers by three to one. This means that women should plan ahead and should take an active role in retirement planning given that they are expected to live years longer and will likely be the sole beneficiaries of their family retirement savings at some point.

2. Investing Potential VS. Savings Potential

On the whole, most financial professionals recognize that women tend to be better than men about saving money and building up a healthy financial reserve. These savings can be tremendously important when it comes to making big purchases or rolling with unexpected expenses or work interruptions, but they aren’t good for long term goals like retirement.

Right now interest rates for money in the bank are so low that funds in checking or savings accounts are probably losing value over time from inflation, instead of growing from interest. Investing in an IRA or other retirement account, however, results in steady gains over time. Even figuring in big market swings like we experienced within the last decade, the stock market (specifically the S&P 500) historically provides a healthy average annual return of 10%, which translates into around 7% for most retirement investors. And, with women living longer than men while earning less on average, women also have more flexibility and more to gain by investing with a bit less conservatism than men.

3. Work History Gaps Work Against You

Women usually play the larger role when it comes to caring for and raising children, and that means that women are more likely than men to step out of the job market for years at a time. However, leaving the workforce is easier than getting back in, and work history gaps—no matter the cause—can weigh against you.

Employers generally don’t consider childrearing experience the same as work experience, and a few years off the job can be hard on important job skills and experience—especially in highly competitive fields. This can make finding a new position difficult, resulting in longer income gaps, lower salaries, and slower retirement account growth.

This problem is often even worse for women who quit work in their later years in order to care for their elderly parents. Not only do these women have to deal with age discrimination if and when they attempt to reenter the work force, but time out of the workforce in the 30 years before retirement can diminish Social Security benefit calculations.

If you need help developing a sound financial plan for your retirement, or have other financial questions that you need answered, call Heritage Financial today at 480-397-1184 to make an appointment. We specialize in helping in individuals just like you make the most of your money and live the life you want to live!

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