A recent survey highlighted what may be a disconnect between expectation and strategy as it relates to client retirement planning.
According to Financial Engines, 51% of women said they were looking forward to retirement, a considerably higher amount than 41% of men. However, data shows that women actually have a more difficult time securing comfortable post-work lives due to generally having less money saved at the time of retirement, as well as needing to fund more years out of the workforce.
“While women have to plan for living longer and often start out retirement with less accumulated wealth due to absences from the workforce, our survey found that they are more comfortable with themselves as they get older and want to do more in retirement,” Kelly O’Donnell, executive vice president at Financial Engines, stated in a media release. “After spending their lives working, raising kids, and often acting as caregivers to aging parents, many women see retirement as some much-needed and well-deserved ‘me time.'”
On the other hand, not all women are stress-free regarding their financial futures. One in four admitted to feeling anxious about their finances, with health care costs, running out of money and Social Security going bankrupt cited as some of the most pressing concerns.
Whether your female clients are feeling optimistic about their post-work lives or are eyeing retirement with trepidation, now is the time to help them understand their unique positions and focus on smart financial strategy.
Female retirees face challenges
Echoing the Financial Engines report, David Littell, director of a retirement income program at the American College in Bryn Mawr, Pennsylvania, outlined the obstacles women must contend with.
“Women have lower lifetime income based on less time in the workforce,” Littell told Reuters. This is often due to women needing to take time off from their jobs in order to give birth and raise a child.
“As a result, they have less in savings, lower Social Security benefits – and they live longer than men,” Littell continued. “Those things don’t go well together.”
Of course, as pointed out by a report from the Heinz Family Philanthropies and The Women’s Institute for a Secure Retirement, there are other hurdles as well.
Many women work in jobs where a retirement plan is not offered, and disparities in earnings between men and women also leave the latter at a disadvantage.
However, it could be the simple fact that women have longer life spans that puts them most at risk. Data from the Centers for Disease Control and Prevention’s National Center for Health Statistics shows that American life expectancies hit a new record high in 2012. Women are now expected to reach an average age of 81.2 years, up from 76.4 years for men.
This explains why women are more susceptible to requiring specialized services like long term care. In fact, while 68% of men will likely require long term care at some point in their lives, 79% of women will.
Options for financial protection
First and foremost, insurance may be the best way to keep female retirees financially protected. While coverage under Medicare will be a valuable tool, long term care and life insurance policies can ensure your clients receive the services they need while also giving them financial options.
Long term care will help pay for the assistance with day-to-day tasks Medicare simply won’t cover, while life insurance can not only be a valuable estate planning tool, but also act as an asset that retirees can tap into for supplemental retirement income.
Additionally, insurance products like fixed annuities can act much in the same way as a pension, providing women with steady income as long as they live.
Of course, helping your clients understand the value of these products is not the same as convincing them they need to invest in them.
Painting a clearer picture
With a high percentage of women feeling perhaps overly optimistic about their retirement prospects, a basic needs analysis could help you flesh out the details in a way that hits closer to home.
For instance, while most clients will have a vague idea of the comfortable post-work lifestyle they want to lead, they may not have considered the costs and complications that can arise. In addition to their needs at the time of retirement – mortgage payments, utilities, groceries, etc. – there is the potential for future inflation to affect everyday costs, including medical care. Also, if your client is married, she needs to understand how her financial position could change if her spouse passes before her.
Moreover, the needs of loved ones – such as long term care for parents and university tuition for children – can weigh heavily on retirement planning.
In short, your client should be made aware of each and every way their nest egg could be depleted. Then you can outline the solutions to these risks and show how easy products like long term care insurance and fixed annuities are to implement.