Advising The New Demographics

How women are taking action to prepare for brighter financial futures

by Ann Bair

Throughout my time working in financial services, I have grown to appreciate the tremendous value advisors and financial professionals bring to retirement savers. For women, many of whom will face tougher challenges when planning for retirement, the guidance of a financial professional may be even more vital.

Due to a number of factors, including gender pay disparities, greater caregiving responsibilities, longer life expectancies and lower levels of retirement savings, planning for retirement presents unique challenges for female investors.

But women are resilient and resourceful by nature. When it comes to financial challenges, many women I know have taken actions to adapt and put themselves in a stronger position for the future.

For example, when stay-at-home orders during the COVID-19 pandemic were put in place, women were more likely to adjust their daily routines to care for children and family members, while simultaneously managing work responsibilities in an at-home setting. This balancing act has not been easy.

However, it appears that two years of stress have driven many women to take a more proactive approach to managing their finances than they were a year ago. And it’s encouraging to see that, as the pandemic continues to linger, women are working with financial professionals to help them navigate the changing environment and prepare for the future.

These and other insights regarding women’s attitudes on their finances and their relationships with financial professionals were uncovered in Nationwide’s Seventh Annual Advisor Authority study, powered by the Nationwide Retirement Institute®. We surveyed nearly 2,500 investors and financial professionals last year to learn about many of the critical financial issues they faced as a result of the pandemic. In particular, we wanted to better understand how the ongoing pandemic has impacted women’s financial lives, how they are faring in the “new normal” and what they are doing to improve their confidence and security for the future.

Recessions, Market Volatility And Taxes Remain A Concern

While the pandemic has pushed women investors (those with investable assets of $100,000 or more) to take decisive action to prepare for the future, they’re still concerned about economic recessions and market volatility. While spikes in inflation and market volatility occurred after we conducted this survey, many women saw this coming and were already bracing for the impact. In fact, 27% of women said inflation and taxes are some of the biggest financial concerns they will face in the next year. Our study also showed:

• Seven in ten women investors are concerned about a U.S. economic recession in the next 12 months
• More than half anticipate market volatility will increase in the next 12 months
• Their biggest financial concerns include: protecting assets, taxes and inflation

While the COVID-19 recession influenced many financial decisions that women made, our study demonstrated they were more likely than men to make better long-term decisions when facing a financial crisis. In fact, fewer female investors withdrew funds from retirement savings plans such as 401(k)s, 403(b)s and IRAs in response to crises compared to men. This is a positive finding, given the long-term consequences of selling at market lows.

Rising inflation may present greater challenges for women, given the general pay disparity between men and women and the increase in prices of consumer goods. Our survey shows women tend to be more conservative in their investing strategies, putting themselves at a potential disadvantage when inflation spikes. This presents a great opportunity for financial professionals to help female clients identify strategies that may cushion the impact of inflation on their portfolio.

Looking Toward The Future With Optimism

The pandemic changed the way we live, work and relate to one another. It also altered how women view their finances. The upheaval of the past two years, including turbulent markets and juggling their careers and childcare during remote learning, has prompted women investors to take a more proactive approach to managing financial risk and planning for their futures. Our study found:

• 83% have a strategy to generate guaranteed retirement income
• 73% plan to take a more active approach to investing
• 72% have a strategy to protect from outliving their savings
• 59% have a strategy to help protect assets against market risk

Partnering With Financial Professionals To Build Confidence

Increasingly, women (64%) are making these money moves with support from financial professionals. In fact, two in five said working with a financial professional or advisor gives them more confidence in their financial future, especially during financial crises. More good news: with their additional support and confidence, women investors were significantly more optimistic about their financial outlook in 2021 compared to 2020 (49% vs 32%).

Balancing daily life with planning for the future can be challenging, especially when the deck is slightly stacked against us. Women are navigating immense uncertainty, as we are raising families while caring for aging parents, living longer, and facing higher healthcare costs. As investors, we’re looking for a partner in planning for the future. We want more than just financial guidance or direction. We want to understand the different scenarios we might face and build the knowledge we need to make informed decisions.

Although our past studies showed that women were reluctant to seek professional advice due to competing priorities such as family and career obligations, it appears that sentiment is shifting. Women investors value their relationship with financial professionals, especially as they begin to take charge of their finances against a backdrop of ongoing pandemic-related uncertainty.

Addressing Longevity

Women have unique financial planning needs and challenges. For instance, outliving their savings is a key financial concern for most women. Today, average life expectancy for a 65-year-old woman is 86.7 years,^[1] and there’s a good chance they will live even longer.

This is something I experienced first-hand with my grandmother, who enjoyed a long life of 102 years. Fortunately, she prepared in advance for her financial future (together with her husband, my grandfather) and stayed involved in managing her savings even in her later years.

The possibility of longer lives and longer retirements helps explain why many women seek protection from outliving their savings. The top solutions women investors have in place to help them financially through a long retirement include:

• Social Security (64%)
• Dividend-yielding stocks (36%)
• Pension or other defined benefit plan (33%)

While these are good strategies, and most of them do provide guaranteed income, there is no guarantee the amount of income will be adequate in retirement.

Financial professionals can help women understand the amount of income they can expect from current plans, optimize social security benefits, understand the impact of market volatility, and estimate health care costs in retirement. This exercise can help them identify gaps in their plans that can be addressed through other solutions outside of these common strategies, including annuities and life insurance, to find additional ways to meet their long-term financial needs in retirement.

Financial professionals who can tailor their strategies for the specific needs of female clients have an opportunity to build long-lasting relationships and grow their practice by attracting new clients and retaining the spouses of aging male clients. More importantly, you can help them gain confidence and achieve more secure financial futures.

[1] Social Security Administration, Life Expectancy Calculator.