Retirement Challenges for Women Only

Though many of the risks we face in retirement are the same for both men and women, women do face some unique challenges as they age. The Society of Actuaries recently released a report titled “The Impact of Retirement Risk on Women.” In that report, the authors note five types of risk that are likely to be more challenging for women. Those five are:

  • Outliving their assets;
  • Loss of a spouse;
  • Chronic disability
  • Healthcare and medical expenses; and
  •  Inflation.

Outliving Their Assets. Women tend to live longer than men. At age 65, women have a life expectancy that is three years longer than men. That time period may not sound like much, but when you realize those are the last years of a woman’s life, and healthcare and medical expenses are likely to be the highest at any point in a woman’s life, you can start to see where even a few extra years of living expenses can be very high. For all women over age 65 who are living alone, 40% depend entirely on Social Security alone for their income.

Loss of a Spouse. In many cases, the death of a spouse leads to a lower standard of living for a woman. Again because they live longer, women are more likely to be alone in old age. In general, married partners tend to be clueless about the financial impact of the death of a spouse the survivor (who is usually a woman).

Chronic Disability. The longer a person lives, the more likely his or her health will decline to the point of needing some form of nursing home care. Again since women tend to outlive men, women are even more likely to face some type of long-term chronic disability. The problem is somewhat worsened by the fact that women are more likely to be alone in old age and less likely to have family members available to serve as caregivers.

Healthcare and Medical Expenses. For a couple age 65, healthcare costs can average about $250,000 over their retirement years. Nursing home costs can run $70,000 per year per person. Women are likely to have some type of longer chronic disability than men, and women are more likely to need some type of assistance in a long-term care facility than men.

Inflation. Over the 30-year period from 1980 to 2009, inflation averaged 3.5%. But medical costs increased by about 5.8%. The longer a person lives, the more detrimental impact inflation will have on their personal finances. And since (one more time) women typically outlive men, inflation will likely be more harmful for women.

Well, once we think through and realize the problems and challenges women face due to these various risks, so what? Is there anything to be done about them, or is it fait accompli? Fortunately, we (men and women) can all take action to address these risks.

For starters, how about making the year 2011 the year you become financially literate about retirement risks like these? Talk to a financial advisor about long-term care. Visit the Social Security web site and learn how the age you start your benefits will impact your income. Spend some time on the Medicare web site familiarizing yourself with the various benefit plans (Part A, Part B, etc.) and their costs. Hire a financial advisor to give you a 2nd opinion on your investment mix in your IRAs, 401(k) plan, 403(b) plan, etc.

You can also make 2011 the year you start maximizing your retirement readiness. For many of us (men and women), it’s time to get serious about managing our health wisely (eating well, exercising, dropping some weight, etc.). If you are a pre-retiree, make time this year to plan and think through how you will spend your “free time” (you’ll have lots of it available) in retirement. And finally consider how you will use your wealth to support your living expenses in retirement. Consult with an attorney to get your estate plan in order (will, living will, healthcare power of attorney, etc.).

Dealing with retirement risks may not be particularly appealing to you now, but trust me, these issues won’t go away with time. They may indeed get worse the longer you ignore them, and even more so for women. If you address even just one of these risks per month starting in 2011, you’ll be that much readier for retirement, even if retirement is only a few years away.

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About Mike Wilson

Michael L. Wilson, MBA, CFP®, CRC®, is the owner of Integrity Financial Planning. Prior to founding Integrity in 1998, he worked for two years as a faculty member at the College for Financial Planning in Denver, training other financial advisors. Mike has 10 years of experience in the mutual fund industry, having worked with Fidelity Investments and Invesco Mutual Funds. He holds an MBA in Finance from Baylor University. Learn more about his work at www.integrityplanner.com.
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One Response to Retirement Challenges for Women Only

  1. Mike Wilson says:

    And here’s yet another article from the Financial Security Project at Boston College with similar info: http://fsp.bc.edu/women-lag-in-retirement-readiness/

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