Women Less Prepared for Retirement than Men

Two new studies amplify the benefits—especially for women—of working with financial advisors, and provide insight into a changing demographic for life insurers.

Women approaching their retirement estimate they will spend $4,624 beyond what Medicare covers each year on health care for premiums, co-payments and deductibles, according to a Harris Interactive survey of 1,250 Americans more than $250,000 in household assets. Men estimate an average of $5,882; however, a 65-year-old couple would need an estimated $240,000 to cover medical expenses during their retirement years, plus long-term care costs.

“The fact is women live longer than men, which means they will spend more time in retirement and that places women at a greater risk of outliving their retirement assets,” said John Carter, president of sales and distribution for Nationwide Financial. “It also may increase their chances of incurring long-term care costs during their golden years. That’s why it’s especially important for women to plan for health care costs in retirement.”

Exacerbating the issue of under preparedness is the fact that, on average, women live longer than men and the income gap between men and women. Disparities in income have resulted in a retirement savings shortfall of 25 to 30 percent compared to men, according to the Insured Retirement Institute (IRI).

The Harris survey further notes women are more likely to be left needing care, as there is a 70 percent chance that a woman 75-years or older will be widowed, divorced or unmarried, compared to just 30 of men who are alone at that age for those reasons.

"Due to persisting income disparities, a retirement income glass ceiling has been placed over women, and it is limiting their ability to fund a secure retirement," said Cathy Weatherford, IRI president and CEO. "But by working with a financial advisor, women can break through this barrier by developing a holistic retirement strategy that includes additional sources of retirement income."

According to the Harris survey, half of retirees claim to be ‘terrified’ of the potential cost of health care and its impact on their retirement savings, however there is pervasive ignorance about the actual costs of care and how much they should expect Medicare to cover. Women estimate Medicare will cover 65 percent of their health-care costs, but according to the survey, 85 percent said they guessed or didn’t know, just 2 percent said that a financial advisor told them. Further, 46 percent of women, and 39 percent of men, said they were somewhat or not at all confident in their plan to live comfortably in their retirement years.

Additional findings:

• Half of male baby boomers have $200,000 or more in retirement savings, compared to 35 percent of female boomers; and only one-third of female boomers are ‘highly confident’ they will have sufficient resources to pay for health care expenses during retirement, compared to 41 percent of male boomers.

• More than 43 percent of female boomers expect to retire at 65 or later; more than 34 percent do not know when they will retire.

• Nearly 53 percent of female boomers have not consulted a financial advisor.

• When selecting a retirement investment product, guaranteed monthly income, financial advisor recommendation and rate of return were most important to female boomers.

• Just four in ten women age 55 and older believe they have done a good job planning financially for retirement.

• One-quarter of female boomers have little to no confidence they are planning appropriately for retirement.