Significant Financial Risks for Women

There is no question that women are amazing. In fact, studies continue to confirm their immense contribution to every society that they are a part of.  

Unfortunately, women are also more vulnerable to financial insecurity. Typically, women earn less than their male counterparts,[1] live longer, and have more breaks in their employment. With all this going on, approaching financial decisions strategically is critical for women. 

Technically speaking, social security is gender-neutral. However, a combination of several factors creates different levels of retirement security for women and men.  I have listed below some of the reasons why women typically have far less money in their retirement than men. 

1. Women have More Breaks in their Employment. Women have less time in the workforce due to pregnancy, childcare, or family care responsibilities, resulting in lower social security benefits than men. Department of Labor data shows 74% of women between the age of 25 and 54 were in the workforce, compared with 89% of men, and this gap widens in the 55-to-65 age group.
2. Women Earn Less than their Male Counterparts. Despite the wage gap shrinking over the past few decades, women still earn less than men, generally speaking. In fact, according to the recent data from the social security administration, the median earnings of working-age women who worked full-time, year-round were $40,000, compared to $50,000 for men. Resulting in the average annual social security income received by women 65 years and older being $13,891, compared to $17,663 for men.

3. Women Live Longer than Men.  Women have a 10% chance of living to 102 years old! A woman at age 65 is expected to live 2.2 years longer than her male counterpart. Furthermore, according to a study by the Center for Retirement Research at Boston College, the odds that women will need nursing home care is higher, and they spend more time in care than men, adding to the cost of their retirement and Long-Term Care insurance.

4. During Retirement, Women are More Likely to be Single. Since most women have older spouses, they can end up widowed without the financial assistance their husbands may have provided. Consider this sobering statistic: While the poverty rate of a married couple over 65 years old is only 4.2%, the poverty rate for a single woman over 65 years old is 20.3%.

Planning for Your Future. It sounds obvious, but women can develop a more secure future and worry less about running out of money during their retirement years by being proactive about their financial planning, and the best time to start, if not already, is now.

Making the right financial planning decisions today and choosing the best social security option for your circumstances are two of the most important actions a woman can make for her retirement years.

Closing the Gap. My experience as a financial advisor working with women is that even though they often have good financial habits, e.g., they budget their spending, have an emergency fund in place, and save what they can.  Their problem (and opportunity) can be their top line, i.e., their salary level.  For my clients in this situation, I have encouraged them to search for a job that pays more, and that provides better benefits.  In today’s employment environment this strategy has met with success.

What you Can Do Today.  Visit my website - www.boerumhillfa.com and schedule a no-obligation one-hour strategic meeting where you can confidentially share your financial concerns and understand how a fee-only financial advisor can help you with your financial future.  Alternatively, you can contact the National Association of Personal Financial Advisors[2] to find a financial advisor near you.

[1] The wage gap between men and women is 19.9% in total and is as high as 24.6% for women with advanced degrees https://www.dol.gov/agencies/wb/data/earnings/Earnings-ratios-wagegaps-educational-attainment

[2] www.napfa.org