By Sandy Keir, CFP®, Suncoast Advisory Group
I typically dislike articles written about women, because I think it’s wrong to make generalizations about half of the population based on nothing but gender. But, when certain behaviors unique to women negatively impact their financial security, they need to be mentioned. With awareness comes change.
Numerous articles have been written about how ill-prepared baby boomers, in general, are to retire. Some economists calculate that the retirement savings deficit in this country is between $6 and $14 trillion!!!! But Sally Krawchek, former president of Bank of America’s Global Wealth and Investment Division, says that this deficit will impact women more than men. “Let’s begin to acknowledge that the retirement savings crisis is a gender crisis _ a women’s crisis,” says Krawchek. Women retire with about two-thirds of the money their male counterparts do, but end up living longer and needing an even larger nest egg.
Why do women end up with less retirement savings than men? Well there are several reasons. First, women still make less money than men. Women earn an average of 77 cents for every $1 earned by men and, calculated over an entire lifetime, that’s over $300,000 less income! That’s $300,000 that can’t be saved, invested, contributed to a retirement plan or used to buy an income-producing annuity. That means we’re starting retirement with less money than men.
Second, because women make less than money than men, their pension payments will be smaller and they’ll receive smaller Social Security checks than men do. Why is that? It’s easy to see why when you remember that both Social Security and pension administrators average your salary out over a number of years (35 years for Social Security) and base your benefit payment on the average monthly amount you earn over your working years. So the less you make today, the lower your benefit amount will be and the less you’ll have to live on in retirement.
Third, according to the Employment Benefit Research Institute, those men and women who do contribute to their IRAs contribute, on average, roughly the same amount ($3,995 for women and $4,023 for men) but women end up with less. The average IRA balance for men in 2012 was $136,718 and it was only $75,140 for women. Why is that the case when we know that women at all salary levels contribute a higher percentage of their income to their 401(k) plans than men do?
It’s because women invest differently than men. The fourth reason women are less prepared to retire than men is that women, on average, are more risk averse than men. According to a 2013 Global Investor Pulse Survey, only 26% of women felt comfortable investing in the stock market, while 44% of men did. And stocks tend to be the best performing asset class over long periods of time. So, if you’re contributing to your IRA and 401(k) regularly, but making poor investment decisions, your money is going to grow much slower.
And the fifth reason women are less prepared for retirement is that women are going to live longer and need their money to last longer than men. While a 65 year old man can expect to live—on average—to age 84, a woman can expect to live to 86.6. And if both husband and wife are 65 today, there’s a 43% chance that one or both will live to age 95!!!! So, not only do women start with less money, but they need it to last longer.
Now that we’re aware of the problem, what can we do about it? Find a competent financial advisor who will tell you how much you need to be saving today, how much you’ll need before you retire and how you need to invest your money. Interview several advisors and find someone who is genuinely interested in your needs, wants, goals and aspirations and rely on them for help. A good advisor will become your partner and be there to help you transition to retirement and beyond. With awareness comes change!
If you can relate to any of the issues Sandy writes about in this month’s article, call her at 941-928-8485 or email her at sandy@suncoastadvisorygroup.com to receive complimentary information.
Sandra “Sandy” Keir, CFP®, CRPC, CLTC
Sandy’s “aha” moment came at an early age. She had a wonderful childhood in Duluth, Minnesota. Her father was a good provider. Her mother was a devoted wife and mother. But when it came to the household finances, her father was the decision-maker. Sandy made the connection that the breadwinner was the boss. Money was power. “I decided that I always wanted to be in control of my own destiny,” she says.
A lifelong wealth advisor, Sandy’s passion is to help other women pursue the financial independence she has gained. “As women, many of us are going to be on our own at some time in our lives,” Sandy says, “so we either need to gain an understanding of money and finances or we need to partner up with a financial advisor who can guide us. Many of the decisions we make, such as when to start taking Social Security, are irrevocable. However, only about 30 percent of women currently seek advice before making those decisions.”
During her 25 years in the wealth management industry, Sandy has worked for such companies as Merrill Lynch, Lincoln Financial Group and Transamerica Capital. She lived in Sarasota for 15 years before moving to Pennsylvania in 2009, to become the Regional Sales Manager of Western Pennsylvania for Kades-Margolis Corp. She returned to Sarasota in 2014 to join Suncoast Advisory Group.
In addition to being a Certified Financial Planner, of which only 23 percent are women, she holds the Chartered Retirement Planning Counselor (CRPC) and Certified in Long-Term Care (CLTC) designations. She earned her bachelor’s degree in Political Science from the University of Minnesota in Minneapolis.
Suncoast Advisory Group
941-928-8485
www.suncoastadvisorygroup.com