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The Factors That Put Women At A Disadvantage In Retirement

When we hear the words “gender gap,” the most publicized and pervasive type usually comes to mind — the difference in male versus female wages earned. This discrepancy continues even today: On average, female workers earn approximately 80 cents for every dollar their male counterparts earn, the U.S. Census Bureau reports.

A more overlooked gap merits attention, however, when it comes to preparation and planning for retirement. Two key factors can put women at a disadvantage. First, they live longer than men and must sustain their lifestyle for a longer time. LIMRA Secure Retirement Institute research shows the average life expectancy for women is 85.6 years old, versus 83 years old for men.

Second, women may not be comfortable with their level of financial acumen. For example, our research shows 40 percent of single-women retirees say they have little or no knowledge of financial products — a higher proportion than single-men retirees (25 percent). This can result in more risk aversion and possibly less diversity in their investment mix, both of which may limit the long-term performance of their portfolio.

Given this perspective, there are several ways these unique challenges translate into opportunity in the women’s retirement market:

Size. In the United States, a total of 7.6 million single households are aged 55 and older, with more than $100,000 in investable assets. Nearly two-thirds of them — or 4.7 million — are single women. Thus, there is a large market to serve.

Timing. LIMRA research shows that, on average, women retire two years earlier than men (at 63 years old versus 65 years old). At the same time, four in 10 female pre-retirees say they have major concerns about outliving their assets. This combination points to a recognized need for lifetime income solutions.

Mindset. Our research shows female pre-retirees (aged 50 or older) are more worried than their male counterparts about the impact of financial risks they may face in retirement. This is true in terms of both the likelihood and severity of the potential effects on their retirement security.

In addition to these considerations, women express specific preferences related to working with advisors. For example, female clients are more likely than men to delegate investment decisions to advisors: Nearly 40 percent of women retirees say they want to depend on their advisors when making future financial decisions. Further, they seek long-term partnerships, as two-thirds of women say they would like to work with their advisors for the rest of their lives. 

These preferences extend to consolidation as well. Retired single women are also more likely than retired single men or retired couples to consolidate their assets with their advisor. In fact, 50 percent of single-women retirees have consolidated the bulk of their assets (90 percent or more) with their advisor.

Advisors can position themselves for success in this market by helping women prepare a formal retirement plan. Our research clearly shows that formal retirement plans increase consumer confidence and allow advisors to develop strong client relationships, while carving out realistic goals. For single-women clients in particular, advisors can begin with offering to prepare a formal income plan — as only one-third of single retiree clients (both men and women) currently have one in place.

Ultimately, best-practice advisors understand that single-women clients may have different needs than others. Those who connect with their unique vantage point will be most prepared to attract and serve this large potential client base for the long term.

Alison Salka is responsible for directing LIMRA’s retirement research program. She supervises and conducts consumer research, benchmark studies and white papers focused on helping member companies better understand issues and trends in the retirement market. Contact her at [email protected].

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