Filling the Gap: Obstacles Women May Face With Retirement Savings

Posted on March 6, 2020

By Kim Ciccarelli Kantor CFP®, CAP®
Co-authored by Judith G. Alexander-Wasley MBA, CFP®

March is Women’s History Month–a time to commemorate and honor the contributions women have made to history and society. Women play an integral role in nearly every economic sector:  healthcare, business, education, and consumer spending. Despite their growth in the workforce and beyond–there is still a large gap in women’s retirement savings. Recent research from the Transamerica Center for Retirement Studies found that 46% of women are “not too confident” or “not confident at all” about saving for retirement. Most of us know the benefits that come from a comprehensive retirement savings plan; however, women may be confronted by some unique challenges.

  1. Longevity

Living a long and happy life is a dream of many. Advancements in medicine and preventative healthcare have allowed each generation to typically live longer than the last. This means that today individuals could be looking at life-spans that extend well into their 100’s. While it’s intriguing to imagine such longevity, it will require a decent nest egg to sustain oneself. This process becomes even more vital for women who live on average 2.3 years longer than a man the same age.

One way to plan for longevity is to take a careful look at your lifestyle and determine how much money will be needed to sustain it over a period of 20-30 years. Some individuals may not be willing to adjust their standard of living in retirement so it’s important to understand the projected costs and how to save for them. Savings strategies might need to be adjusted annually to ensure you meet your financial goals and desires.

  1. Healthcare Costs

As our population ages we may need to consider the additional health costs related to living longer. A longer life does not necessarily guarantee better health. There are statistics showing individuals living for years with severe health conditions. Often, one major medical event can cost tens of thousands of dollars. A recent report found that woman may need to save approximately 20% more, on average, to cover medical expenses incurred in their later years. Medicare typically does not cover all required expenses. It can be difficult to predict future expenses as they relate to increases in medical treatment and care, especially long term care facilities and specialized medications.

Early steps to reduce your risk of health issues can often be beneficial. Regular health check-ups along with a doctor-advised diet and exercise plan might alleviate various preventable conditions. It can be advantageous to contribute to a tax-advantaged Healthcare Spending Account (HSA), which permits tax-free withdrawals to cover certain medical expenses in retirement. Your advisor will be able to provide further clarification on HSA eligibility and guidelines. 

  1. Career Interruptions

Women now comprise nearly half of the U.S. labor force. Many women are also staying in the workforce longer. Despite these trends, women tend to have more career interruptions. A TIAA retirement study discovered out of the individuals surveyed, men averaged 38 years in the workforce and women averaged only 29. They referenced leaving the workforce for various reasons including caring for children, aging parents, or partners. Balancing primary caregiver duties with a full-time career can be difficult and may require reducing hours, reducing pay, or taking a leave of absence. In these instances, making life adjustments to care for children or loved ones may allow for a reduction in certain costs in their care; however, they may have a long-range impact on your savings.

Becoming a parent or primary caregiver often requires a great deal of selflessness, and at times, it may seem appropriate to put your life on hold to help others. Throughout these periods of your life, it is important to ensure that saving for retirement remains in the picture. During career breaks, if you are married, your spouse can continue to make contributions to a Traditional IRA or Roth account on your behalf. It could help to discuss with your advisor the impact a career interruption may have on your current and long-term financial plans. Adjustments may be needed to accommodate your changing circumstances.

Women may be presented with certain challenges pertaining to retirement. On the brighter side, a potentially longer lifespan or time away spent with loved ones should not be feared but celebrated. Developing savings strategies with the guidance of your advisor could help you experience your long-awaited retirement dreams.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Additional securities and investment advisory services offered through FSC Securities Corporation, Member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail N, Naples, FL 34108. 239-262-6577.