What Every Woman Needs to Know Before They Died

Women in America have made tremendous strides in improving their overall financial outlook and closing the income gap with men. During the last two decades, many women have become better educated and more self reliant regarding their financial future than their mother’s would ever dream. For example “Today there one third more women graduating from college than men, with sixty percent of women with business degrees out earning their husbands”. Also the number of women earning $100,000 or more per year has quadrupled in the last decade.

Although women’s incomes and economic power have increased steadily over the years, women face many unique challenges when it comes to planning for their financial future. Women must be cognizant of the set of circumstances which set them apart from other Americans as they attempt to capitalize on their economic potential and secure their financial future.

Increased Longevity

One distinctive and sometimes overlooked characteristic of American women is the differences in life expectancy between men and women. Typically, women can expect to live an average of seven years longer than men. According to US Census data, males born in the US in 1982 are expected to live 70.8 years. While females born in the same year will typically live 78.1 years. This increased longevity for women creates several challenges that women must consider before they can build a sound financial plan for themselves. In many cases, because women are expected to outlive their husbands, they must plan for more available income during, their retirement years to maintain their lifestyle and independence.

In fact, all Americans due to advances in health sciences are living longer than ever before. Consequently, many retirees are spending as much as twenty years or more enjoying their senior days. When asked, the majority of American retirees felt their number #1 concern regarding retirement, was the prospect of outliving their retirement savings. The effects of inflation and higher taxes make this a real problem for American retirees. For current and future female retirees, the increased chances of a long retirement should be an important consideration in addressing their retirement plan priorities.

Although more women have join the American workforce over the years, more often they still maintain more traditional maternal roles within the household, such as raising kids and being the chief caregiver to the entire family. Women remain the most likely family members to sacrifice career aspirations to provide care to elderly parents, children or disabled spouses. By some estimates, on average women, “will forfeit $550,000 worth of salary and benefits (including Social Security) by taking time off from work to care for family”.

For many women, living longer will also mean potentially outliving their own primary caregivers-their spouses. It will also increase their risk of needing the services of a nursing home facility due to sickness, injury. It is estimated that the majority of women, over 50%, (as opposed to 33% of men) reaching the age of 65 will need nursing home care before they die. Although the Medicare program is designed to protect us in later years from big medical expenses, it pays for nursing home care only in certain limited and very specific circumstances. With the average nursing home care facility running as much as $40-80,000 per year, the cost of these services can have a tremendous impact on personal savings, lifestyles and in some cases restrict financial independence.

Divorce Rates

Divorce rates in America today also have a significant impact on many women’s ability to create long term personal wealth. With divorce rates as high as 50%, the results for many women are a loss of income and often a dramatic change in life style. As if the psychological impact of family separation were not enough, many divorced women are unaccustomed to handling their own finances and many do not have the confidence to take on the role of financial planning for their senior years.

Often after years of unemployment, many divorced women must reenter the workforce in order to supplement or maintain existing standards of living while continuing to provide primary child care responsibilities. As a result, women in this circumstance are likely to find themselves with access to fewer resources, limited years available to generate retirement assets, and insufficient experience in dealing with issues of finance and risk planning.

Failure to Manage Risk

Another consideration for many women is how they handle the inherent risks we all face. In particular, the risk of premature death or disability. This is especially true when it affects the primary income earner in the home. For homemakers, dependent on a spouse’s single income, the risk of financial setback is even greater. Although women in this situation are at greater risk, very often there is not adequate insurance protection to ensure enough income replacement beyond the prime child rearing years. Often couples are more focused on paying for college expenses rather than their retirement or their risks of income loss. Moreover, many couples in this situation don’t consider the number of years of female life expectancy in this equation when considering insurance protection.

The consequence of inadequate insurance protection means that many women are left to support their children without enough income to maintain existing lifestyle. Many are forced to sell their home and uproot their children from their neighborhood, schools and friends. Typically women in the situation, must now return to the workforce after being unemployed for many years. Understandably this creates a shift in focus on immediate income needs and issues of retirement often become less of a priority.

In the majority of cases, providing enough income replacement protection is a result of poor advice or other priorities. However many husbands are reluctant to provide adequate coverage due to negative perceptions and stereotypical ideas. In some cultures, it is not unusual for husbands to reject the notion of insurance all together due to a feeling that they will be leaving their spouse’s wealthy and also may be providing opportunities for future husbands.

Additionally, there is evidence that some women are reluctant to insist that there spouses provide them the protection they need despite the recognized risks. Women in this situation must understand how important insurance is in creating wealth and mitigating risk for families and particularly for women. A suitably positioned insurance plan can often create an “instant estate” and prevent unnecessary upheaval and the sacrifice of retirement goals.

Retirement Plans and Savings Rates

Although the number of women in the workforce is at an all time high, women are less likely to work for companies that offer retirement plans. Where women are offered employer sponsored pensions, they tend to be more conservative investors and often do not fully understand how to maximize their investments plan options. Women without access to employer sponsored retirement plans, place themselves at greater risk of dependence on social programs such as Social Security and Medicare to provide resources during retirement.

Over the years the Social Security system has provided supplemental income for millions of retired Americans. However, according to many estimates, the long term financial viability of the Social Security system is now in doubt. Unless the United States Congress finds the political will to intervene and revamp the current system it is expected that the social security program will no longer be able to pay current benefits, in full, starting in 2041. According to the Social Security Administration, at that time it is expected that only 78 percent of currently scheduled benefits will be payable. This will have a tremendous impact on millions of Generation X retirees and women retirees who fit this age demographic.

Another important issue for women is the personal savings rate of Americans. Up until the current economic crisis of 2009, Americans personal savings rates have been declining for years. In 2005 savings rates in this country dropped into negative territory. This means Americans were actually spending more money than they earned. This level of savings has not been seen since the Great Depression when the country was faced with thousands of business failures and job losses. Part of the reason for a smaller savings rate is that, in recent years, Americans have enjoyed a rise in the value of other investments such as stocks, bonds, and real estate. In addition, the availability of low interests, also discourage savings and encourage borrowing for big ticket items such as automobiles and personal real estate.

In deed, our economy now runs on consumption. Americans of every economic circumstance are encouraged by government and media to spend at record levels to continue fueling our economy. While increased spending rates are good for the US economy, for Americans planning for retirement this is risky behavior. “Americans seem to have the feeling that it is wimpish to save,” said David Wyss, chief economist at Standard & Poor’s in New York. “The idea is to put away money for old age and we are just not doing that.” At this time, there is no evidence that woman save at any better rates than do men in America.

Building a sound financial future has never been an easy task for the vast majority of working Americans. The task is now more difficult than ever with the current state of the American economy. The economic slowdown of 2008-09 only serves to exacerbate an already complex and formidable undertaking. The current economic recession has given us wide spread job losses, the meltdown of retirement accounts, rising inflation, budget deficits, and the potential for higher taxes. This has and will continue, for the foreseeable future, to have a devastating impact on millions of American families.

American women, seeking to generate retirement savings, would do well to be mindful of the particular circumstances that distinguish them from other Americans and make their journey to financial independence more problematic. Now more than ever, women in this country are enjoying greater career opportunities and advances in income equality with men. Despite these advances, women must also carry the additional burden of longer life spans, high divorce rates, and lower saving rates. This places even greater pressure on women, faced with building a retirement nest egg, to ensure that they will not outlive their savings and decreases the odds of achieving financial security.

The good news for many women is that there are many financial strategies available to help them address their unique challenges and put them in position to create and preserve their wealth. In addition, as women become better educated and financially savvy they are realizing that they do not have to go it alone. More women are seeking the advice of professional financial planners who can help them access their retirement goals, customize a financial plan that meets their individual needs and put them on the right track to financial security.