Women and retirement: Financial challenges

Women and Wealth

Retirement is the primary financial goal for most people, but women often face unique challenges in preparing for it.

Here’s a look at why it’s important to have a plan.

The growing financial power of women

Quite simply, women now earn, control and inherit more money and assets than ever before.

  • Women make up nearly 47 percent of the U.S. workforce.1
  • Women control up to 80 percent of all household purchases in the U.S.2
  • Women are more likely to give to charitable organizations, and give higher amounts, than men.3
  • Women are set to inherit the largest share of family wealth when approximately $30 trillion will be passed on from spouses and aging parents.4
  • Women outlive men by an average of 4.9 years,5 and many can expect to assume control of the estate they shared with their spouse.

Even with the increasing control over financial matters that women have gained, four challenges persist.

Women now earn, control and inherit more money and assets than ever before.

1. Finding balance

Statistics show that a growing number of women are joining the sandwich generation,” squeezed between the competing financial, physical and emotional needs of children and aging parents.6

Women are more likely to take on the primary responsibility of caring for children or aging relatives – going in and out of the workplace or sometimes having to make the difficult decision to leave work altogether.

If you’re weighing the option of leaving work for a time, there are many factors to consider. These range from putting your career on hold and potentially moving off a promotion track to the loss of 401(k) employer matching contributions. On the other hand, choosing to stay home may save your family money that would otherwise be spent on outside care.

These realities come with a myriad of trade-offs, which in turn can impact saving for retirement.

2. Minding the pay gap

On average, according to the U.S. Bureau of Labor Statistics, women earn just 82 cents for every dollar earned by a man. Over the course of a person’s work life, this can add up to, on average, $418,000 less in income earned by a woman.7

It explains in large part why women face such significant financial challenges, particularly in preparing for retirement.

3. Longer life expectancy

Women generally live longer than men and are enjoying longer lifespans than at any time in history. A woman who reaches age 65, on average, can expect to live another 20 years, and one-third of women age 70 can expect to live into their 90s.8

As a result, your money may need to last for 20-30 years longer in retirement than previous generations. Even with modest annual inflation of 3 percent, daily living expenses such as housing costs, utilities and household expenses, will double in less than 25 years.

4. Managing healthcare costs

Even if overall living costs are rising at a modest rate, the greater concern for retirees is that healthcare costs are expected to rise much more rapidly. You need to prepare for the fact that by age 65, healthcare expenses play a much more prominent role in your financial life.

One of the most critical aspects of retirement planning is to realistically assess the potential of future healthcare costs. The average woman faces an annual cost of $16,857 for healthcare expenses at age 65. By age 85, the cost doubles to $33,662 per year.8 These costs are only likely to go higher. By one estimate, the cost of healthcare will rise at an annual rate of 5.5 percent over the 10-year period ending in 2027.9 This exceeds the broader inflation rate we’ve experienced in recent years.

While you become eligible for health care coverage under Medicare at age 65, it’s important to remember these important facts:

  • Some aspects of Medicare require premium payments.
  • Medicare does not cover all typical medical expenses, and you may want to consider purchasing supplemental health insurance in addition to Medicare.
  • Most forms of Medicare coverage don’t cover dental work, eyeglasses or expenses related to stays in a long-term care facility.

As you assess your expenses in retirement, be sure to account for the significant challenge that healthcare costs present.

It’s time for a plan

When considering your retirement savings strategy, it’s important to account for the challenges you may face on the way to and in retirement. One way to do that is to put a comprehensive wealth plan in place.

Learn more about retirement planning and savings strategies

1. U.S. Department of Labor, “Women in the Labor Force,” based on 2016 data.

2. Brennan, Bridget, “Top 10 Things Everyone Should Know About Women Consumers,” Forbes, Jan. 21, 2015

3. “Do Women Give More?,” Women’s Philanthropy Institute, Sep. 2015.

4. “Women and the Great Wealth Transfer,” Investopedia, June 25, 2019.

5. Social Security Administration Fact Sheet, “Social Security is Important to Women,” Sep. 2016.

6. “The Sandwich Generation: Rising Financial Burdens for Middle-Aged Americans,” Pew Research Center.

7. The Gender Wage Gap: 2018; Earnings Differences by Gender, Race, and Ethnicity. Institute for Women’s Policy Research.

8. Social Security Administration.

9. Centers for Medicare and Medicaid Services, “National Health Expenditure Projections 2018-2027.”