December 19, 2011

Women & Retirement Finances: It is Not a Pretty Picture

A comment left on a post a week or so ago asked if I'd explore the important subject of women and retirement finances. Since I am not a financial planner or expert, I have included some links at the end of this post to sites that you might find helpful. But the topic is important enough for me to do some basic research and pass along what I have learned. 

Building a financially satisfying retirement is more difficult for the average older woman for many reasons. Gender roles, lack of training in basics of investing, and a lack of confidence are all contributing factors. A depressing fact is that one in five women will live in poverty during her retirement. Also true:

*While working women earn less. Obviously that affects the amount available to save and invest, the size of any company pension, and the amount of a monthly Social Security check. So, what is to be done? How can women prepare for and thrive during retirement, married or single, widowed, or divorced?

*Women spend less time in the workforce. On average, females spend 10 years out of the workforce while raising children. Men average less than one year. There is a direct correlation to lifetime income.

*Women are less likely to have retirement plans. Again, because of less time in the workforce, or primarily involved in part-time work fewer have actual retirement plans from their employers.

*Women have lower Social Security benefits. The average social security check for a woman is $800.00 per month and for a man it is $1,200.

*Women live longer. The typical woman will live an average of 6 years longer than a man. That puts additional pressure on her retirement savings and investments to fund several more years. 40% of women living alone depend on Social Security of all their income.

*Divorce can have a devastating effect on retirement. Because of the over-reliance on the husband's pensions and Social Security checks, divorce can leave a woman in a serious financial bind.

So, what is to done? What can a woman (or a man) do to improve the odds that a financial crisis isn't part of her or his future? Here are some common sense suggestions for you to consider:

  • Become educated on financial basics. The good news is that once comfortable with the hows and whys of various investment options, women tend to be better investors than men. They make less risky choices, are more likely to admit a mistake and move on, and tend to know what they don't know. Resolve to learn one new financial fact every week.

  • Train yourself to be financially independent. Be aware of the finances. Even if your husband or partner is handling the money know what is happening. Stay involved. .

  • Fund your retirement account regardless of Your age. For younger women, retirement seems eons away. Put in as much as you can, especially if your company matches funds. Otherwise you are leaving "free" money on the table.

  • Don't fear  reasonable risk. If all you do is protect your capital instead of making it grow, inflation will put you farther and farther behind. Liz Perle, author of Money, a Memoir put it well when she said women perceive their investments like a lake, that is a finite resource. Men tend to look look at it as a river that is constantly renewing itself. Liz says consequently, "women are afraid to risk."

  • You don't have to do all this alone. There are plenty of investment groups and clubs that will help you learn and share ideas with others. The local library and the Internet contain a wealth of information and resources. Here are a handful of web sites that provide an excellent overview along with specific steps anyone can take to become more comfortable in managing finances.

Doing the background work for this post helped open my eyes to the unique challenges many women face in protecting themselves financially. Like so many parts of building a satisfying retirement it boils down to taking charge of this part of your life. Learn what you need to know, have faith in your abilities and abilities, and constantly adjust and improve your financial plan.

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  1. In my case, the opposite is true. My husband is going to be 55 years old and other than his half ownership in the home we live in now, his retirement account is under $10K. That's right. Have you fallen off your chair yet?

    It used to be more, funded by me and a small inheritance I received. I, stupidly, put money into a few ROTH IRA's for him (and me) because I wanted the money to grow without tax penalties. First chance he got (marital discord), he cleaned them out and went on a spending spree. The remainder that he has left represents only the money he did manage to put away when he worked as an employee for a company that funded a 401K for him, five years ago!

    I'm tired of talking to him. I gave up a long time ago. It's so bad, I changed my will, so that if I should die before him, my kids will get most of my money. I couldn't tolerate, even from heaven, watching him go on another spending spree.

    Sorry, but as of this past year, all I care about is myself. I never earned as much money as a man could, so my experiences have been different. If it wasn't for my father, and my real estate investments, good or bad, I'd don't know what I would be doing now.

    Hubby is a good guy. Just not too smart when it comes to money. Now, after being kicked in the head a few times this past year, I think he finally gets what being frugal and living a more authentic life entails. The first thing he said to me, as we sat down to prepare our 2012 budget (hint-he may be getting more work this year) was that he wants to start saving money right off the top BEFORE any bills are paid.

    Duh? Better later than never, that's what I always say.

  2. One of the most difficult things for me is to figure out my finances IF my husband (and his pension) dies. There are few calculators that permit you to put in a pension and then make it go away.
    I am looking into a type of hybrid annuity fund that pays back what you put in upon death... I can see it as a good vehicle for women like me who never kept a job long enough to warrant a pension of their own.
    I keep telling my stay at home mom daughter---FUND that IRA at all costs. Hard for her to understand.

  3. Morrison,

    "I never earned as much money as a man could." Isn't that is a large part of the problem? Women still earn just over 70 cents for every $1 a man earns. That, coupled with society's normal bias of the man controlling a couple's financial direction even if not best suited to do so, creates problems like yours.

    $10,000 total in a retirement account? That is beyond scary.


    The most complete web site I am aware of with all sorts of financial calculators is here:

    I have used his retirement calculators for several years..scan all the way to the bottom of the page.

    I'd be interested in what you learn learn about the hybrid annuity.

  4. The hybrid? Lincoln Money Guard It sounds pretty interesting. I will be going to a meeting about it in two months. If you have an insurance person- I'd love to hear a second opinion. You put an amount in- and you are "assured' an amount out in long term health insurance. In the end the original amount is returned to the family.
    I will really listen when I get there!

    Thanks for the calculator. It had what I needed- value/annuity calculation.

  5. Bob,

    Thank you SO much for writing on this topic. I'm one of those women who is not well prepared for retirement. I've learned a lot here and will be clicking on the links you have provide. I'm very grateful to you.

  6. Janette,

    I'll check it out. Glad you found a calculator that works for you.


    I'm pleased the subject resonated with you. If one of the links is especially useful, drop me an e-mail. I'll keep it handy for future posts.

  7. We oftentimes here situations where the husband has hid finances from the wife, keeping her in the dark. I am the opposite in that I have asked my wife many times to sit down with me and I will explain our investments and overall financial picture. I do not believe it is complicated, but what is apparent to one person is a maze to another. Her response is always that she has absolutely no interest, and will be going before me anyways.

    It is frustrating since I want things kept up money-wise for our only child, but I fear that might not be the case if I pass first. Not that my wife will not have the same desire, but more that she might get taken advantage of if she views our finances as overly complicated, and asks for "professional" help. Would be curious how many men have the same issue since the stories generally address the opposite extreme, probably because it makes for more sensationalism.

  8. Chuck,

    The inability of one partner, whether male or female, to make the effort to learn enough to not be taken advantage of is a major problem in many households.

    I have gone over the basics with my wife and she has written them down in a little blue book. Problems arise, though, when I change a password, or something else is a bit different than what was written in the book months or years ago...she gets very frustrated that it isn't exactly the same.

    The only solution may be regular days set aside every month to review the information and have the partner go through each step. Unfortunately, if it isn't done on a quite often it is a struggle. Add in the grief and confusion after a loved one's death and I'm not sure all the practice in the world will help someone who isn't naturally attuned to that type of material.

    It is probably rare for two people in a marriage to both be financially up to speed, especially in our age group. Maybe the best answer is to find a family friend or relative who can step in if the need arises. I'd hate to think my wife would pick someone out of the phone book and hope he or she would be dedicated to her best interests.

  9. In our household I'm the one that handles the money and the investments. I'm pretty sure my husband has a general awareness. I've got it all typed up with the most recent version in the safe.

    When my first marriage ended I promised myself I'd never be financially dependent on a man again. For the first 15 years of my current relationship we had separate finances. Now they're combined in retirement, but I am still careful.

    Good post topic!

  10. Linda,

    Live and learn! Your example is a strong one for anyone to follow, male or female: never leave future financial wellness to only one person in a relationship. Fiscal awareness should be a task that either partner can handle if need be.

    I've received a few private e-mails that cite the example you had with husband #1. Not only was awareness of assets a problem, but so was who to trust and how to proceed.


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