Why Women Need More Retirement Planning Than Men

One of my dear family friends, Tina, just turned 68. She’s retired, divorced, living alone in her home of 25 years and is terrified of running out of money. A few weeks ago we had a heart to heart about her personal finances and retirement over dinner.

She expressed how she wished she had saved more and taken the time to learn about investing during her working years. As much as she would like to pick up part-time work to bring in some extra income now, her health conditions make it difficult. While she was married, she relied on her spouse to handle all of their finances. Thus, she never spent much time budgeting or putting together a retirement plan.

A Lack of Planning Can Make Retirement Difficult For Women

Fortunately, she is receiving Social Security benefits and a small pension. But Tina is spending more than she expected on healthcare. As a result, her retirement savings are getting depleted much faster than she anticipated.

Many other women just like Tina have come into hard times during their retirement years. It and wished they paid more attention to their personal finances while they were younger. If you have similar fears, don’t panic. It’s not too late for you and the women you care about most to put together a more comprehensive retirement plan.

Let’s explore a few reasons why women need more retirement planning than men for a financially stress-free future.

Women’s Unique Characteristics Can Impact Retirement Planning

Why do women typically need more retirement planning than men? Here are a few key reasons why women should take extra steps to ensure their financial security during their golden years.

  • Women’s life expectancies exceed men’s and women often live more years without a spouse. Recent data by the Social Security Administration found that on average women are living over two years longer than men to age 86.6 versus 84.3. In addition, it’s important to know that about 25 percent of adults aged 65 today will live past 90 and 10 percent beyond age 95.
  • Studies show that women are often more conservative in their investment styles, which can translate to less growth. Women have a tendency to hold more cash than men. In addition, women are less willing to take on added risk for the chance at greater returns.

Simple Steps Women Can Take For Greater Financial Security

Now that you are aware of some of the unique circumstances that women face in retirement, let’s explore several simple steps you can take to ensure your own financial security and a comfortable retirement.

Max Out Your 401(k) Plan. It’s not too late to start participating in your employer’s 401(k) plan. If your employee benefits include a company match, take full advantage of it every year.

The maximum 401(k) contribution set by the IRS is $22,500 for 2023. The sooner you can start maxing out your 401(k) contributions, the better. But if you are unable to contribute the annual limit, at least do your best to maximize your company match.

Open An Individual Retirement Account (IRA). Whether or not you have access to a 401(k) plan at work, you can choose to open a traditional or Roth IRA account. IRAs are a highly common way to continue growing your retirement savings and they are easy to setup and fund.

The downside of IRAs, however, is the maximum contribution amounts are much lower than 401(k) plans. In 2023, IRA contributions cannot exceed $6,500 for those aged 49 and under or $7,500 for people 50 and over.

Get Help With Your Investment Portfolio. Are you sitting on a lot of cash? Being too conservative with your money and holding a lot of cash leaves you vulnerable to inflation. Don’t let your money lose value because you’re too afraid to invest.

Get help with your investment portfolios and find a comfortable asset allocation that matches your time horizon and financial goals. Our Top Financial Products page has many helpful resources you can use that make it easy to optimize your investments for growth and protection.

Plan For Long-Term Care
Before You Need It. There’s no denying that healthcare expenses are still rising. Healthcare continues to represent a sizable portion of the US economy. Even though growth rates have come down, they are still unsustainably high.

Inflation chart by category
Medical costs have come down but remain unsustainably high

Just because you have health insurance, does not necessary mean it includes long-term care coverage. Talk to your healthcare provider and ask for clarification. Purchasing a separate long-term care policy could be to your advantage. The highcosts of long-term care could quickly eat away at your retirement savings if your health deteriorates and you’re unprepared.

Learn Personal Finance Fundamentals And Prepare To Be Financially Independent. Many women, like my friend Tina, end up divorced or widowed at some point in their lives. Don’t let unfortunate circumstances leave you feeling financially lost. Remember, you’re never too old to become financially savvy.

Research Social Security And Medicare Options. If you haven’t created a Social Security account online, it’s a good idea to do so even if you don’t anticipate collecting benefits in the near-term. Once you complete your profile you can easily access your earnings history and benefits information.

Check for any inaccuracies and use your benefit estimates to assist in your retirement planning. Start to familiarize yourself with the various Medicare options as well. Be aware you may need to plan for out-of-pocket costs for certain expenses Medicare that doesn’t cover such as hearing aids and eyeglasses.

Related reading: The New Three-Legged Retirement Stool: You, You, And You

Quick Recap

It’s important for everyone to develop a comprehensive retirement plan with savings goals. The earlier you can start contributing to your retirement accounts and putting your money to work, the better.

Women have many unique characteristics that warrant more retirement planning than men. Longer life expectancies, lower incomes, less time in the workforce, and being more conservative with their investment strategies can all impact women’s needs in retirement.

Get Prepared With Free Retirement Tools

Retirement planning can help you navigate through unexpected twists and turns and provide a lot of peace of mind. Be realistic with your desired lifestyle needs, savings goals, day to day expenses and unexpected emergency costs.

Make things easier on yourself by utilizing retirement planning tools to help take the confusion and complexity out of the process as well. Check out our comprehensive Empower Personal Dashboard review – a free set of financial tools to help grow your wealth and plan for retirement.

Empower has the best retirement calculator and planner on the market because it uses real data and Monte Carlo simulations to come up with the most realistic financial scenarios for your future. Other calculators simply ask you to guess input values to then come up with your financial future. The problem with this method is that we often underestimate how much we are saving and spending.

With Empower’s retirement planner you can input different life events such as a wedding or home purchase in your cash flow statement and recalculate your financial future to see how you’ll do. Empower uses real inputs to produce the best possible outputs.

Personal Capital Retirement Planner Tool

For further clarity and confidence into your financial life, simply sign up for Empower, link all your accounts, and their Retirement Planner will use your real-time account data to compute real outputs for your future. Everybody should give it a try.

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About the Author: Sam started Financial Samurai in 2009 as a way to make sense of the financial crisis. He proceeded to spend the next 13 years after attending The College of William & Mary and UC Berkeley for b-school working at Goldman Sachs and Credit Suisse. He owns properties in San Francisco, Lake Tahoe, and Honolulu and has $810,000 invested in real estate crowdfunding.

In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $300,000 a year in passive income, partly thanks to his investments in real estate crowdfunding. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.