It’s no secret that women are playing a bigger role in managing wealth today. However, when it comes to retirement planning, many women face a unique set of challenges that require a different approach. As a financial advisor, you can create a more personalized retirement plan and help your female clients retire with confidence by deeply understanding their unique needs.
The unique retirement needs of women
For many women, retirement is synonymous with financial security. Women, on average, live longer than men, which means their retirement savings need to last longer, too. Having stable and sustainable income in place to maintain their lifestyle and cover essential expenses is paramount. With wage gaps, career breaks for caregiving, and the rising costs of healthcare, there is a deeper level of financial stress that many women feel as they age.
Additionally, many women seek flexibility and independence in retirement. The ability to adapt to changing circumstances—whether due to health, family obligations, or personal interests—provides a sense of control. Ensuring that their financial plan accounts for these dynamic needs allows for greater peace of mind.
If women invested at the same rate as men, there could be an additional $3.22 trillion in assets globally to invest. By 2030, women are expected to control much of the $30 trillion in financial assets held by baby boomers. This is an incredible opportunity for advisors to connect with a powerful – and growing – market.
"We believe the growth in personalized strategies, such as direct indexing, will have great applicability in helping to solve for some of the specific challenges and circumstances faced by women investors and households that need to manage a portfolio for different investor needs."
Dana D'Auria, Co-Chief Investment Officer and Group President, Envestnet Solutions
Retirement options for women
Just like all areas of wealth management, women have access to the same retirement planning vehicles as everyone else, but how they use these retirement tools can make a big difference in securing their future. These options can be the cornerstone of a secure retirement:
- Employer-sponsored retirement plans: Many women contribute to 401(k)s, 403(b)s, or pension plans through their employers. These plans are a primary source of retirement savings, and understanding contribution limits and employer matching options can significantly enhance retirement outcomes.
- Individual retirement accounts (IRAs): Both traditional and Roth IRAs offer women a chance to build their retirement savings outside of employer-sponsored plans. Each comes with unique benefits, such as tax-deferred growth for traditional IRAs or tax-free withdrawals for Roth IRAs.
- Social security: Understanding social security eligibility and timing strategies can make a big difference in retirement income. By coordinating the timing of claims, women can maximize their social security benefits and ensure that they are not leaving money on the table.
- Personal savings and investments: Brokerage accounts, personal savings, and other investment vehicles also play a role in retirement planning. Interestingly, it is important to note that when given the opportunity, women investors perform well, outperforming men by 1.8 percentage points annually.
- Spousal benefits and divorce considerations: Women’s retirement plans are often impacted by their marital status. For married women, understanding spousal benefits and how to maximize social security payments is critical. Additionally, divorce can have a significant impact on retirement, and it’s essential to consider how this might alter income sources.
Key challenges women face in retirement
While the retirement vehicles outlined above are accessible to all, women face unique challenges that can impact their ability to save for and live comfortably in retirement. Some of these challenges include:
- Wage gap and lower lifetime earnings: On average, women generally earn less than men over the course of their careers. Over a 30-year career, the gender pay gap averages out to approximately half a million dollars in lost earnings per woman. This disparity leads to lower lifetime earnings and, consequently, smaller retirement savings. This gap also impacts social security benefits, as they are calculated based on a person’s lifetime earnings.
- Career interruptions: Women are more likely than men to experience career interruptions, particularly due to caregiving responsibilities. These interruptions can significantly impact their ability to save for retirement, leading to lower savings over time and fewer opportunities to grow wealth.
- Investment confidence and risk tolerance: Many women report feeling less confident about making financial decisions, particularly regarding long-term investments. Addressing this concern by educating women about investment strategies and risk tolerance can help them feel more empowered to take control of their financial future.
- Inflation and cost-of-living concerns: While not unique to women, it is important to note that inflation and rising costs of living are ongoing concerns for all retirees, but they are particularly important for women, who tend to live longer and thus require a more durable retirement strategy to maintain purchasing power throughout retirement.
Retirement planning strategies for women
Financial advisors can play a pivotal role in helping women overcome these challenges by employing targeted strategies to strengthen their retirement plans:
- Maximizing contributions: Encourage your female clients to contribute as much as possible to tax-advantaged retirement accounts, such as 401(k)s and IRAs. Many women do not fully take advantage of contribution limits, potentially leaving valuable savings on the table.
- Social security timing strategies: Help women understand the benefits of delaying social security claims. By waiting to claim benefits, women can increase their monthly payout, which can provide a stronger financial foundation for retirement. Advisors can provide value to their clients by staying up-to-date on the latest social security policies.
- Planning for long-term care: With healthcare and long-term care costs on the rise, it is important to explore insurance options, such as long-term care insurance, and develop a savings strategy to address these needs.
- Encouraging financial education: Financial literacy is key. Empower women by providing resources and education that help them become confident in managing their retirement plans. Regular conversations about investment options, retirement goals, and strategies can go a long way toward building financial confidence.
- Conducting regular portfolio audits: Retirement plans should evolve alongside a client’s changing circumstances, market conditions, and long-term goals. Regularly reviewing and rebalancing investment portfolios and help optimize asset allocation, manage risk, and ensure strategy remains aligned with a woman’s retirement objectives.
Empowering women for a secure retirement
Proactive retirement planning that addresses the unique challenges women face is essential for ensuring long-term financial security. Financial advisors must prioritize the development of retirement strategies that account for the impact of wage gaps, career interruptions, healthcare needs, and the desire for independence. By engaging in meaningful conversations with female clients, we can help them navigate these challenges and ultimately achieve their retirement goals with confidence.
Visit https://newsroom.envestnet.com/ to access our research, perspectives from industry experts, and the latest news from Envestnet.
