New Aspects On Income

Women and the Longevity Risk

Planning challenges can vary dramatically from that of men

by Doug Dubitsky

Mr. Dubitsky is Vice President of Product Management & Development for Retirement Solutions at The Guardian Life Insurance Company of America, New York, NY. Visit

Worries about outliving one’s money are a concern for everyone. We are all well aware of the “longevity risk.” This may be a greater challenge for women, however, and so there are several strategies they can adopt to accumulate more money so their retirement funds last longer.

The Challenges for Women

While living long can be a good thing, it also comes with the reality that you need to have an income plan to ensure you’ll be able to cover all financial needs, including health care, for a longer timeframe. On average, women live five years longer than men (81, compared to 76 for men), meaning their savings must be spread over a considerably longer period.

Women are also challenged because they generally earn less than men. According to the U.S. Department of Labor (2011), full-time working women earn just 80 cents for every dollar a man earns. When women, who make up nearly half the workforce, bring home less money each day, it means they have less for the everyday needs of their families, and over a lifetime of work, far less savings for retirement.

Pensions are less likely to be a reliable source of retirement savings for women, who are more apt to work in part-time jobs that don’t qualify for pension coverage. In fact, pensions are becoming less and less common, highlighting the need for women – as well as men – to self-fund retirement.

The call of family duty – whether raising a family or caring for elderly parents – means women are taking time off to care for loved ones. This leaves them with less time to contribute to a retirement plan or to receive an employer’s contribution during those times. It may also affect the size of their Social Security benefits.

There is some good news for women on the retirement savings front. Women represent nearly half of all individuals with at least $500,000 in investable assets. They also tend to take better financial risks, leading to better returns, than men.
Women also hold considerable sway in family financial matters. Seventy-nine percent of women feel as though their opinion determines household financial decisions, and they are the primary breadwinner in 40 percent of American families.

Strategies Women Can Take to Address Retirement Planning

Women who seek to minimize the impact of longevity risk can adopt a number of strategies:

  • Commit to a Plan
    Women should be encouraged to take time out of a hectic week to create a plan that helps them visualize their financial future. It’s more important that this just be in writing and less about making it a long or formal statement.
  • Create a Budget
    A good starting point for a financial planning exercise is to track expenses for a month and evaluate which expenses are necessary and which ones are not. This provides an insight into your priorities and can help identify savings that could be applied toward paying down debt or adding to retirement funds. This also helps you buy only what you can afford.
  • Curb Debt as Much as Possible
    Focus on maintaining a healthy balance sheet and pay off high-interest rate credit card debt as soon as possible. Over time, this will help grow net worth – assets minus liabilities.
  • Start Saving Today
    The power of compounding produces long-term financial resources over time. The earlier saving begins, the possibility increases to accumulate more wealth. Time in this case can be on your side.
  • Seek Help from a Financial Professional
    Seeking the help of a financial professional will ensure that you have an appropriate mix of investments throughout your life. An annual financial check-up should include an evaluation of the comparative performance of similar investments.
  • Limit Annual Withdrawals in Retirement
    By limiting withdrawals to four percent of the initial retirement account balance when you retire, you’ll give your nest egg a better chance of lasting 30 years or longer.
  • Address the Caregiving Responsibility
    Understanding what it means to be a caregiver, women may want to be sure the responsibility for their own care doesn’t fall to their children when they need the extra help. Women may want to consider long-term care insurance or employ other programs that provide the financial support needed in their elder years by professional caregivers as opposed to a heavy burden on loved ones. Other options, such as life, health and disability insurance, should also be kept up-to-date.
  • Consider an Income Annuity
    As part of a woman’s overall financial plan, annuities can be particularly appropriate to provide guaranteed income that’s independent of market performance that can last for the rest of their live.
  • A joint life annuity…
    …with survivor benefit can be particularly important for women whose husbands own an annuity or vice versa. In the event their spouse passes away before they do, this type of annuity can continue for the surviving annuitant’s lifetime.

Gender Differences on Retirement Readiness

Seventy-nine percent of women feel as though their opinion determines household financial decisions, and they are the primary breadwinner in 40 percent of American families

Thirty percent of small business owners in the U.S. are women, a rate that’s increasing rapidly. Despite the increasing number of females leading companies, women remain less confident about navigating their financial future alone.
A survey conducted by The Guardian Life Insurance Company of America and the Harris Poll Panel reflected that there are distinct differences between male and female small business owners when it comes to retirement readiness. These differences extend to business owners’ attitudes on risk tolerance to planning for retirement to the characteristics they value in a retirement advisor.

Female small business owners are more likely to acknowledge that they are not as confident and prepared for retirement as their male counterparts. As a result, they are often more receptive to financial and retirement planning advice than men. Women are also more likely to appreciate an advisor who takes time to provide personal education and who meets with employees to educate them.

Retirement planning benefits both women and men. But there are specific factors that impact women more and should be factored in when creating a retirement income plan. Advisors who understand the unique needs of women will be better able to help them save for the future and help them reduce the risk that they’ll outlive their money. ◊

Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice.