February 5, 2016

Women and Retirement Finances: A Rocky Road Ahead?

This post ran over 4 years ago. Recently, I have received some requests to deal with this subject. I thought I'd bring this one back since there are a lot of new readers since it was published. If it generates enough feedback I can take a fresh look at this important subject. I have updated a few links near the end of the post.


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." Educated risk is not the same as speculative 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 a satisfying retirement journey 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.

19 comments:

  1. Much of this will start to right itself with time, as women take on more and more financial responsibilities, either as single women or parents, and as their incomes rise. But we do have a gap occurring now which shows women less equipped financially due to the reasons you articulate. Like most things, education is the answer, but many woman are either kept in the dark by their mates, or have no interest in financial matters.

    Although the stories tend to be geared towards men keeping women in the dark about the family finances (more sensational I suppose), I have found many women have no interest in being educated on the subject. My wife plans to have our daughter handle our financial matters if anything happens to me, since she refuses to get involved with our investments, or learning about investing in general. I feel bad since I believe she is putting herself at a decided disadvantage, but there is nothing I can do to change her mind. My daughter, though, is likely indicative of the newer generation in that she does have a keen interest in the subject of finances. As I said earlier, time will show the situation to be evening out, but we still have a gap with many in our generation.

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    1. Your wife, Deb, is rolling the dice a bit, but I understand. One of my daughters is very smart and very much an independent woman, but financial education (past the basics) is something she just doesn't care to learn much about. She does pay off her credit card each month, has very little debt, and is not into clothes or shoes, so that is all helpful.

      Are women not as interested because they have been kept away from the subject for so long by the men in their lives? Good question. But, with the increase in women CEOs and business leadership I think it may be a generational issue that will disappear over time.

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  2. I do hope this changes for women. I am of the era when I was told at work that I didn't have to worry about my pension contributions; my husband would look after me. And there's the line about not needing to negotiate a wage; I was only working to supplement the family income, i.e. working for "pin" money, as it used to be called. And going to the bank for a loan only to be told that I would need my husband's signature first. We've come a long way, baby. I really think women are at a disadvantage financially because of how we've been socialized. I'm not sure it's any better in this day and age. It seems that women are still expecting some one else to look after them; they have a hard time putting themselves first and saying no; they still maintain the major role in child care and house keeping. I'm often told that I'm lucky and really luck had little to do with it. If luck is where opportunity meets preparation, then I'm lucky but it was more about thinking about the future and being prepared.

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    1. Well said, Mona.

      There will come a day when this type of post will seem quaint. But, not yet. Women remain underpaid, underappreciated in the workplace, and not taught some basic financial survival skills. If the men in their lives truly understand how unfair, and unloving that attitude is in the long term, things would change.

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  3. Do you sell stock now or do you let it play out?
    Do you keep large cash reserves or keep everything in investments?
    More women did well in the last recession (not me) because they let it play out.
    More women (again not me) have been losing less because they keep more in cash.
    That's financial ignorance?
    Single women have big problems because our homes are generally worth less and since we don't have a spouse on the dead we can't get what so many married people take for granted---a house worth a lot for no estate taxes
    We can't put in money into an IRA unless we're working---married people can. That means if we're care taking for free, we're out of luck.
    At the same time if our parents have a substantial estate, one or both would like to leave money to the grandchildren---born or "maybe someday." So more money goes to the married child.
    Women, even with advanced degrees, often work in the helping professions (I'm not talking about teaching where the pension is often great). The salary is generally lower. New York City's social services pays less than Virginia's in many cases but the cost of living is much higher. Are we supposed to live in a ghetto or leave the place we were born---especially when our parents are aging so we can save more money?
    The problems are systematic---not always or often women's ignorance.

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    1. No disagreement from me. The question isn't brain power but opportunity and fairness. The deck is stacked in a certain way and that can penalize women, especially single women, and single men, too, in terms of the tax laws.

      A few recent studies I have seen do say that, generally, women are less risk-oriented in investments than men, and will dump losing investments without as much emotional attachment as men. That means they will do better in a turbulent market.

      This is an area for discussion with important issues involved. I hope we can get a lively interchange going. Thanks, Pia, for your insight.

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  4. I believe attitudes about money are formed at a young age. We taught our children about finances early on, and they seemed to enjoy learning how to earn, spend and save. When I taught school, I always included units on finance, because it's absolutely vital to survival. It's never to late to learn. My own mother was one of those individuals who had no interest in her finances (as long as their was plenty of money to spend). When dad died, she was clueless. I stayed with her following his death, and taught her what she needed to know. She did very well in her remaining years. I agree with ChuckY, education is key.

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    1. I have seen plenty of stories over the years of teenagers and 20-somethings who have no idea how to balance a checkbook because they only use credit or debit cards. Others don't seem to grasp the fact that a credit card doesn't erase the debt, just delays it. It all comes back to education: basic finances 101. Sex has nothing to do with the ability required.

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  5. Very important subject! Our situation is a bit different. My husband and I were both teachers in rural Arizona (equals even LESS pay than urban areas), and I stayed home with the babies for 7 years before heading back to the classroom (which cuts into pensions, etc. but I would never change what I did). I was given a book by a friend right around the time that I inherited a little money. This book changed my life: "Your Money or Your Life", by Joe Dominguez and Vicki Robin. I think a lot of people are familiar with it by now as it is 25 years old or so. Bottom line was to note down how much you spend (on everything) month to month, invest in Treasury bonds, and build up enough interest income to cover your expenses. Long story short, we have done basically what was intended in the book and my husband retired at 52 and I retired at 58. We are debt free, plenty of money to live on (for our simple lifestyle) and have a great retirement. I tried the budget sites online for keeping track of money (Mint, etc) but I found that a sheet a paper in my purse designed by me is all I need to keep track. I was the one mostly responsible for learning and educating myself about finances, etc. and it has been surprisingly fascinating (especially since things have turned out well!). I instructed our two sons in the Financial Independence realm and have given away the book as gifts to friends. As people have noted, women are sometimes reticent to be in charge of finances. I had my doubts (math challenged etc.) but have become very confident in my abilities (I'm a whizz at interest rates!). But I think the greatest nugget to gleam from the book is the relationship people have with money. It is very intriguing and a good read. I understand that there have been some updates to the investment strategies but certainly the basics are still very valid.

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    1. I have read that book a few times myself. It is an easy-to-understand look at how our attitudes toward money can affect everything we do.

      Thanks for adding your story to our discussion. It is important for anyone who is fearful of finances to read of successes like yours.

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  6. I am similar to your daughter in many ways, and had a bad experience later so...During my marriage I managed the money, paid the bills and even on occasion gave everyone (including the hubby) an allowance. Only because I did not use cash and we only had one atm, and had too many "Oh By The Way" issues. My husband had a business credit card. I showed them the budget and asked him if he had questions, but as long as he could go skiing on occasion, the bills were paid and we could still have the housekeeper all was good, lol. On the other hand, he managed the 401k, made the retirement decisions and I just never got involved, it wasn't my thing.

    Admittedly, I always knew that I would have both social security AND a pension. So perhaps that colored my actions or getting involved. When I became a widow, it is no secret that I spent most of that retirement money very quickly-however much of is was on necessities, and funding private educations (which was what I believed my husband would have wished. Again, I had the cushion of knowing when the money was gone that I would still be living on still have a guaranteed income of 35,000 annually, so that may have colored my decisions.

    Unfortunately in my case, I also tried to literally manage my own money, and ended up seriously, seriously losing a small nest egg, even though I THOUGHT that I was informed. So while I even manage to save money on my income, I wont be "investing" as such.

    I guess my big take away has been that "managing money" is not the same as "saving or investing money", and some are mainly good at one, and some mainly good at the other.

    On the other hand, my son has a very small inheritance, some of which is in fidelity and much of which has been spent on furthering his education. Aside from his fidelity investments, he had some cash. He chose apple and asked me what stock I would choose. I say just choose a consumable (he chose coke). Apple is dead weight, and coke has tripled or quadrupled!!

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    1. First of all, Go Broncos! I am sure that attitude is required for folks living in Denver this weekend.

      You make an important point: managing money, i.e. budgeting and such, is different from how to keep that money safe and allowing it to grow. I avoided stocks for most of my life. I could never get comfortable with things that swung so wildly based as much on emotion as reality. Now that both my parents have passed and I have a decent inheritance, I am open to taking a bit more risk. With interest rates close to zero there is no other way to stay ahead of inflation.

      I am lucky in that I have had the same investment advisor for the past twenty years who I trust and who knows my risk tolerance.

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  7. I agree that our cultural background has put a lot of people at an income disadvantage in retirement, esp. many women in our demographic. But I don't totally buy into the "poor, helpless" woman narrative. I have two sisters. Both are better off than I am, and both probably have better money-management skills (one was a math major in college). Then there's B. She's richer than I am, too (although I admit, I set a low bar), and has hired a good money manager to handle her affairs. So I think the lesson for all of us is that we have to pay attention; and most of us could probably use some professional help as well. Btw, I'd happily give up a little money to live an extra six years.

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    1. I think most of us would agree that the "problem" some women have in the financial arena is cultural and situational, not from an innate lack of ability. For women with a husband, kids, and maybe a job, juggling all of that is much more complex than figuring out a balance sheet.

      Like so much in life., proper education and mentoring are the keys. And, I wish you at least an extra 6 years on top of your "use by" date!

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  8. I am an unmarried woman, and thus part of the group most likely to be poor in old age (because we don't have access to a man's retirement benefits). Since one of the important reasons why women have lower wages and lower retirement savings is wage discrimination, I would add to your list that women (and men!)have to get involved with fighting that discrimination. I recently heard the report of a study in which both male and female supervisors offered lower salaries to women than to men in the same job -- without being consciously aware that they had done so. Corporate rules that make it a firing offense to discuss your salary with other workers help to protect this discrimination, so those rules also have to be fought. -Jean

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    1. I am not surprised by the study results you quote, Jean. Much of our discrimination, sexism, even racism, is not malicious, but unthinking. Awareness is the only real solution.

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  9. Another excellent post. As a lawyer/financial planner/economist I would only add that "fee only" advisors, who do not get commissions from insurance companies or brokerage firms, may be preferable for objective advice.

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    1. Good point, Jasmina. Someone who is working for commission is naturally inclined to suggest products or an increased frequency of trades. That isn't to imply a commission-based advisor is dishonest, it is just an additional pressure that must be acknowledged and dealt with.

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