Retirement planning is crucial for people of all ages and both genders, but it is increasingly holding significance for women nearing retirement age in America. Retirement planning for women comes with unique challenges that require tailored strategies to ensure a comfortable and secure future.
As our President, Gregory Liszka, has observed in recent years:
“There’s a huge transition of wealth to women. Women are gaining a large concentration of wealth in America. Women live longer than men do, statistically speaking, and more and more, women are being pushed into roles that they have traditionally never held: “keeper of the purse.” What’s important for them may not be what was important to their husband, financially speaking.”
In this blog post, we will explore three common mistakes women make in retirement planning and provide practical tips to avoid them. By understanding these pitfalls, you can take control of your financial future, decrease retirement stress, and embrace these challenges as opportunities instead.
Retirement Planning for Women Mistake #1: Underestimating Longevity
The Financial Implications of Longevity
One of the most significant mistakes women make in retirement planning is underestimating their longevity. According to the CDC’s 2022 statistics, women live an average of five years more than men in the US. This difference in life expectancy — 74.8 years for men versus 80.2 years for women —means that women need to make their retirement savings last longer.
This extended lifespan can lead to increased financial pressure and the risk of outliving savings, especially when unexpected circumstances push them into a caretaker role. Greg recently helped a couple of clients who fell into this category:
“A couple of older clients just signed on with us. He got really sick during Covid, to the extent that he was in a hospice, on oxygen. Nobody would have bet on him pulling through, but he did. Mentally, though, he lost a number of years. He just couldn’t remember things, and he recognised that he could not be the one making all the decisions — so his wife stepped into that “number one” seat.
She came to me while he was still sick: “I have no clue what to do. I’m just finding random things. A box of gold coins in the closet — I didn’t know we had any gold coins! What do I do with that, Greg? I’m digging through our mail, trying to make sure we don’t have bills — how do you even write a cheque? That’s never been my thing; I’m really worried!”
Of course, the team at Iron Point Financial were on hand to help her through that transition, and of course this kind of thing won’t happen to everyone, but it did give us reason to think there might be other people out there in a similar situation: women who need help and don’t know what to do.
Estimating Longer Lifespans in Financial Planning
To avoid this mistake — the mistake of underestimating health and life expectancy differences between men and women — women should consider longevity risk when planning for retirement. What this means is that you would be wise to estimate a longer lifespan and plan accordingly, in a way that empowers you to make intentional decisions for the next season of your life.
As a rule of thumb, many financial advisors recommend assuming you’ll live into your 90s, even if that seems like a large bump on the average life expectancy figure. Taking this kind of precaution can help to ensure that you will have more than you need during your retirement years.
Practical Strategies for Longevity Planning
There are several strategies to account for longevity in your retirement plan. One approach is to save more aggressively during your working years, particularly through tax-advantaged savings vehicles like employer-sponsored 401(k)s or IRAs. Compound interest is your friend!
Another is to delay claiming Social Security benefits to maximize your monthly payments — something that is especially important for women given their (on average) lower lifetime earnings. Additionally, you could consider diversifying your investments to include assets that provide income throughout your retirement.
Retirement Planning for Women Mistake #2: Not Taking an Active Role in Financial Planning
Cultural and Societal Factors
Although the world is changing rapidly, women have typically been less involved in financial matters as a result of cultural and societal factors. Traditional gender roles and stereotypes have historically meant that women rely on their partners for financial decision-making.
Unfortunately, this can result in a lack of financial literacy and preparedness for retirement — as in the real-life example we shared in the previous section. The good news is that these cultural and societal factors don’t need to limit you once you start exploring the options available to you.
Steps to Proactive Retirement Planning
Taking an active role in financial planning sooner rather than later is increasingly crucial for women. We recommend you start by educating yourself about personal finance and retirement planning.
Online courses, books, and financial workshops can provide valuable knowledge, but it’s also important to put that knowledge into practice — for instance, through participation in discussions about family finances, and by being involved in financial decision-making processes as soon as you can. That way, you can avoid the unwelcome surprises the client we mentioned earlier had to face.
Basic things like keeping a financial inventory (knowing where those “gold coins” are, and which assets you own), keeping on top of regular bills, and other financial practicals like writing cheques and communicating effectively with your bank all become very manageable when you foster the right habits.
Empowering Financial Independence
To summarise, empowering yourself with the right knowledge and gaining financial independence are key steps in successful retirement planning for women. Simple things like creating your own budget, tracking your expenses, and setting financial goals make a world of difference.
You could also consider working with a trustworthy financial advisor who understands the unique challenges related to retirement planning for women. By being proactive in these ways, you can start to build a secure financial future and make informed decisions that do not depend on your partner, and will serve you well for years to come.
Retirement Planning for Women Mistake #3: Ignoring Healthcare Costs
The Impact of Healthcare Costs
Healthcare costs are a significant concern for retirees, and women, in particular, need to plan for these expenses. Women already face higher lifetime medical costs, and retirement is no different.
Women are more likely to require long-term care and other associated medical services than men, resulting in higher healthcare costs during retirement. These costs can rapidly deplete your retirement savings if you don’t account for them in advance.
Incorporating Healthcare Expenses into Your Plan
Ignoring healthcare costs can be a costly mistake. Women should research the potential healthcare expenses they may face in retirement and incorporate these costs into the kind of financial planning we discussed in the previous section.
To start, we would recommend you consider purchasing long-term care insurance to protect against the high costs of extended medical care. You might also consider investing in a Healthcare Savings Account (HSA), which allows you to set aside cash for out-of-pocket healthcare expenses, insurance premiums and long-term care expenses.
Practical Healthcare Planning Tips
To effectively plan for healthcare costs, we would suggest you start by estimating your future medical expenses. You could look into Medicare and other supplemental insurance options to understand what coverage you’ll have.
Additionally, maintaining a healthy lifestyle — looking after your diet, exercise and sleep — could considerably reduce the likelihood you will experience chronic illness and associated healthcare costs.
Parting Thoughts
Retirement planning for women comes with a unique set of challenges, but by avoiding the three common mistakes above, we believe you will be well-prepared for a comfortable and financially stable retirement.
Remember to account for longevity, take an active role in your financial planning, and plan for healthcare costs. By following these tips, you can increasingly take control of your financial future and enjoy your retirement rather than spending all of your time fighting financial fires.
Finally, if you need personalized guidance, you could consider consulting with a financial advisor as a smart first step — they could help walk you through everything we have discussed here, in the form of a tailored retirement plan that meets your specific needs and goals.
At Iron Point Financial, for example, you could expect:
- A rigorous evaluation process in which we develop a deep understanding of your needs not just as a prospective retiree, but as a whole human being (including your gender-based needs);
- An analysis of your retirement objectives so that we can co-create a comprehensive strategy for achieving your financial targets;
- A tailored investment portfolio that will help you pursue both your short- and long-term objectives; and
- Constant monitoring and adjustment of your portfolio; we gauge performance based on progress towards your unique goals, not a market index.
If this sounds like the kind of retirement planning process that could help you, why not reach out to Iron Point Financial today? Or, if you don’t feel ready to talk to an adviser just yet, but you enjoyed this article on retirement planning for women, why not sign up for regular email updates from our blog, so that you don’t miss future posts?
Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.
