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Women and Retirement Planning: What You Need to do Different than Men

women retirement plansMen and women are different.  I don’t think anyone would argue this, in fact many books have been written about these differences.    Since we are different should women invest differently for retirement than men?  Yes and No.  How can it be both you might wonder?

The investing basics do not change.  Allocations, diversification, the use of insurances, stocks, bonds, etc will not change.  An IRA is not different for a woman, your investing 101 is gender neutral.  So what is different?

The factors that a woman takes into consideration when figuring out what she needs to have going into retirement and creating a plan for how to achieve that goal.

Factors that Impact Women’s Retirement Planning Differently

Women on average live longer than men, so women need more money to support their retirement years.  Not only the basics such as food and shelter but when we live longer we rack up more health care costs and run into a greater need for a nursing home or assisted living.  Thus our cash needs during retirement are bigger than a man’s financial needs.

Many women take time out of the workforce, thus decreasing their income earning years.  We raise kids, care for our parents and other loved ones.  Because of this we tend to make less than men over our lifetime and have fewer years to save.

How Should Women Retirement Plan for these Factors

Save Earlier

While I want everyone to get started saving as early as possible, for women this is especially important that they don’t get started too late in life.  Why?  Since we live longer and we might be out of the workforce we need to fully harness the power of compounding.  Ignoring this great tool will require that we save much more money later in life.

Save More

Again, I want everyone saving more, but for women is this very important.  Since we live longer we need more cash, and it is easier to get that big nest egg by saving more money.  Additionally since some of women leave the workforce to provide care there might have be a few years with reduced or no savings that need to be made up at another time.

Since women are out of the workforce for a time other sources of income such as social security and pensions will be less of factor in planning our retirement income, thus we need to save extra to make up for this difference.

Consider Long Term Care Insurance

Due to the fact we live longer and may need extra help as we age, getting a long term care policy should be a consideration.  Once you are around 60 years of age, consider pricing a policy into your budget.  This will help protect your assets and provide you a comfortable place to live.  I know this can be expensive, so it is another great reason to save as early as possible so that you can afford this down the road.

Take the Right Amount of Risk

While most women tend to prefer less risk then men this is a big no –no!  We need the returns that the riskier investments can provide in order for our money to grow to what we need in retirement.  Cash and bonds are not going to get the job done, you need more return.  Still don’t feel comfortable going into the stock market?  Balance that need for safety by having a larger than normal emergency fund.  If you know that you are covered cash wise for a while, the money in the market seems less scary.

Work with Your Husband when Creating a Retirement Investing Plan

Sit down with your husband and make sure that your investing plans include saving for your estimated life span, not just his.  This is especially important the more of an age gap there is between you and your spouse.  If he is planning to live for 20 years in retirement but the ladies in your family live till they are 98 then you need to increase the number of years you are saving for.

If there is a big age gap make sure that as you are setting asset allocations that match your age and not just his.  When should this make a big difference in your planning as a couple?  When you are more than five years different in age and have different ideas on when you will retire make sure some of your funds stay invested in equities longer.

Make sure you play a role in your family finances.  Don’t just leave it to your husband because you don’t understand money.  Take the time to learn and be active.  Remember we live longer, so eventually you will be managing your finances.  Better to learn today than have to suddenly worry about it after you lose your loved one, and run the risk of being taken advantage of.

Don’t Have a Hubby?

This is important; if you are single make sure that you are actively planning you’re your own retirement.  Be saving every month, calculate what you will need for retirement and start learning about investing.   Don’t wait for a man to come along and save you, build your own future that you control.

Ladies, don’t be scared off by the fear of investing or long term planning.  Time is of the essence in making sure your retirement is just as great as the next persons!  (For more on how to get started learning about women and investing.)

Russ Thornton says April 23, 2013

Nice post, Andrea, and full of important and unique considerations for women as they plan for a comfortable and confident retirement. Thanks for sharing this information

over 55s real estate says April 29, 2013

A very informative post Andrea! You really had shown here some interesting and useful information for every women planning for retirement. Nice share!

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