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Retirement Planning for Women

For women today, retirement will mean something completely different than what it meant for their parents. Although women have made great strides with their finances over the past 20 years, many significant challenges still remain. Here are the four distinct challenges that are unique to women:

Earnings still tend to be lower overall for women.

The Equal Pay Law has been in effect since 1963; however women are still being paid less than men. In 2007, women were paid only 77 cents for every dollar a man was paid, equally a wage gap between $700,000 and $2 million for the average U.S. woman worker over the course of her work life.1 This reduced lifetime income also negatively affects Social Security and pension benefits which are direct correlations to earnings throughout the years.

Women live longer than men.

Women on average live seven years longer than men which means they will need seven more years of retirement income.2 According to the U.S. Department of Labor, a woman retiring at age 65 can expect to live an average of 20 more years.3 Longer lives mean longer retirements and an increased chance of outliving their savings and depending solely of Social Security benefits.

Women spend less time in the workforce.

Women spend an average of 12 years out of work taking care of children and elderly parents.4 According to the latest independent research conducted by Putnam, 46% of women over the age of 45 are caring for an elderly parent and 57% over the age of 45 are providing support for an adult child. This time out of the workforce reduces lifetime earnings and retirement savings, and impacts the ability to vest in a pension or pay into Social Security. Consequently many women may have to delay retirement or decide they cannot retire at all.

Women are still too conservative with their investments.

Studies show that experienced women investors actually earn better returns overall than men because they are more patient investors.5 However, a study by Hewitt Associates entitled also show women tend to invest more conservatively than men, often sticking with “safe” but low-returning vehicles such as savings accounts.6 By being too conservative, women run the risk of their investments not growing enough to support their longer retirements.

Despite all these challenges, women can take control of their financial future and plan for a comfortable retirement. Understanding the unique challenges they face on the path to retirement is an important step in women taking control of their financial future.

*Investing involves risks including possible loss of principal and investments are not FDIC insured. 1. Statistics provided by the Older Women’s League at and the National Committee on Pay Equity, 2008. 2. U.S. Department of Labor, Women and Retirement Savings, December 2007. 3. Sources: Americans for Secure Retirement, “The Female Factor 2008: Why Women are at Greater Financial Risk in Retirement”; Brightwork Partners, “The ‘We’ Generation” study, August 2006. 4. Social Security Administration, Women and Social Security. February 2002. 5. Society of Actuaries, “Risks and Process Retirement Survey Report,” May 2008. 6. Hewitt Associates, “Total Retirement Income at Large Companies: The Real Deal,” July 2008.