Retirement Planning: What Women are Doing Right

Women have the temperament and resolve to potentially manage their money more effectively than men, character traits that could help counter some of the significant financial headwinds against them as they seek to build a retirement nest egg.

Amid the reality of lower earnings potential and longer life spans, women seem to plan ahead, earmark money for savings, and avoid costly knee-jerk reactions to stock market turbulence better than their male counterparts.

Maybe it’s because women regularly juggle multiple priorities, and have natural instincts for planning. They may research investment decisions more carefully, ask questions, and seek professional financial advice.

Women are also more likely to stay the course during market downturns, focusing on long term financial goals rather than trying to beat the market.

Women have less saved

Despite the numerous ways that women excel on the financial planning front, they still fall woefully behind in terms of actual savings. On balance, men have amassed far more wealth than women.

The savings shortfall is largely attributed to the gender pay gap.  The effect of lower earnings is significant. Not only does a smaller paycheck mean women have less money to save, but they also get a smaller employer match on their tax-deferred savings, which is typically based on a percentage of income.

Because of the wage gap, female workers contribute proportionately less to Social Security over the course of their careers, which often translates to a smaller benefit when they retire. A married women who never worked outside the home may be entitled to one-half of her husband’s Social Security benefit.

Caregivers and higher costs

Other factors hamper women’s ability to feather their retirement nest egg, as well.

For starters, women spend more time out of the labor force, caring for children and aging parents, which means they have fewer years to fund their retirement.

Women also have a longer life expectancy. So they often have greater expenses during retirement, including more medical and long-term care costs.

One way women can mitigate the financial effects of an underfunded nest egg is to delay claiming Social Security benefits beyond their full retirement age, which increases their monthly benefit for life.

Women face significant financial obstacles on the road to retirement security. By bringing their discipline and investment strengths to bear, however, they can potentially offset some of those challenges and set themselves up for a more successful savings outcome.

Many already are.

Provided by [Roger A Silvera, LUTCF], courtesy of Massachusetts Mutual Life Insurance Company (MassMutual)