Addressing Women’s Unique Retirement Needs

Kristine Voorhees, CMFC®, Financial Advisor with Waddell & Reed

Women have become a powerful presence in today’s society. As a demographic group, women have a significant impact economically, academically, professionally, and personally. Consequently, there has never been a better time for women to take control of their financial futures.

Women also face unique circumstances that require special investing considerations, as evidenced by the following:

According to a July 2008 study by Hewitt Associates, women generally need more money for retirement, in part because they live three years longer, on average. Yet most women have done less to prepare for their financial security.

Among the Findings:

• The average woman’s 401(k) balance was approximately $56,000, compared with about $103,000 average for a man.
• Women typically wait two to four years longer than men to begin saving for retirement.
• Women are less likely to invest aggressively (65% for women, vs. 71% for men).
• Women in the study contributed an average of 7.3% of their pay to their 401(k), compared with 8.1% contributions from men.

Part of the challenge is that women, on average, make less than men. According to the Social Security Adminstration, in 2007, the median earnings of working-age women who worked full-time, year-round were $35,000, compared to $45,000 for men.

And women spend fewer years in the workforce, in part because they’re more likely than men to take time off to raise families. Smaller (and fewer) paychecks means lower Social Security benefits during retirement. In 2007, the average annual Social Security income received by women 65 years and older was $10,685, compared to $14,055 for men.

Other industry research has found women are more likely than men to cash-in their 401(k)s early, especially when they change jobs or leave the workforce to tend to their families. The vast portion of women, up to 90%, also say they are uncomfortable managing their finances.

Add it all together and it’s clear that women, even more so than men, need a good financial advisor who can help customize a plan that addresses their particular challenges. No two investors are alike. With a solid roadmap, women have the potential to build investment portfolios not only as healthy as their male colleagues’ accounts, but that can last those extra years in retirement.