It’s important for families with two income-earners that both parties are equally engaged in realistic yet effective plan for retirement savings. Research from the Insured Retirement Institute, however, says this ideal is far from the norm. As part of the study, the IRI surveyed 1,000 Americans on their financial planning strategies. They found women generally expressed more concern than men regarding their financial stability in the future, especially with regard to retirement. According to the survey results, women tended to report a preference for higher-yield savings plans, favored aggressive spending adjustments and valued the advice of a financial professional more than men.
The results of the study show that women tend to be comfortable taking an active role over not only their own personal finances, but in the role of managing expenses and investments like, life insurance plans or other investments, for the entire family. The reasons for this increased trend are easy to speculate on.
“The anxiety expressed by women is understandable when you consider the challenges they face in achieving a financially secure retirement,” IRI President and CEO Cathy Weatherford said. “Income disparities and time out of the workforce are among factors that will reduce retirement savings as well as Social Security and employer-provided retirement benefits. At the same time, longer lifespans will necessitate more savings to produce additional years of retirement income.”
Indeed, a wide rift exists between the median incomes of women and men, especially in high-level, high-paying positions. According to information from the U.S. Bureau of Labor Statistics, women on average make 76 percent of what men earn. However, this gap is narrower for low-paying, entry-level positions, yet much wider for more senior employees. According to analysis in The Atlantic, female financial advisors can expect to make just 58 percent what men do. Female chief executives make 72 percent of the salary as their male counterparts. Clearly, there’s a strong incentive for women to take an active role in their financial future.
The IRI study suggested differences in how women and men view their roles in their household’s financial planning. About 39 percent of men reported taking the lead in working with a financial professional, yet 39 percent of women said they and their spouse split the role evenly. Just 25 percent of women considered themselves “do-it-yourself investors,” preferring to manage their assets and capital on their own. Compared to 40 percent of male respondents who made this claim, this also shows a divide in how women and men choose to split up the work of handling finances. Women, though, are more likely than men to consult their friends or family for financial advice.
What it means for financial professionals
Understanding these key differences in the financial planning habits of women and men is essential for finance professionals to better understand their clients. While tradition may dictate a woman’s passive role in her and her family’s financial health, the IRI study challenges that notion. At the same time, women need to embrace their potential as leaders in the realm of personal finance, and take appropriate steps to secure a stable, productive financial environment.
“Women will need to channel their concerns into positive actions,” Weatherford said. “This is an area where the retirement planning community can make a significant impact, but it will require a more thorough understanding of women’s priorities, values, and preferences.”
Financial professionals should understand that every client wants only the best for their own and their family’s financial future, whether they happen to be women or men. With this in mind, advisors shouldn’t rule out life insurance and other financial products for both spouses in a family. The IRI study only serves to reinforce the idea that anyone’s desire to take a leadership role in their financial success is valid and to be taken seriously.