Industry Voices

Women and Retirement Risk: What Should Plan Sponsors Know?

Anna M. Rappaport, FSA, MAAA, a fellow of the Society of Actuaries (SOA) and member of the American Academy of Actuaries, suggests actions to help women better prepare for retirement.

By PS | July 20, 2016
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As the Baby Boomers are reaching retirement age, there are growing concerns that many Americans are inadequately prepared for retirement. Women face the same lifetime risks as men: outliving their assets, facing a long-term-care event, getting disabled earlier in life, saving too little, investing insufficiently, or suffering a loss due to a scam. But because they have different life paths, many women face greater challenges and are less prepared for the period late in life. 

There are many reasons for women’s and men’s different retirement experiences:

  • Women live longer, and the population at the highest ages is primarily female. Therefore, their retirement funds need to last longer than men’s, and older women are more likely to run out of money.
  • A high percentage of older women are widows, and some spend many years as widows. If their spouse was sick prior to death, that may mean assets were used for the spouse’s medical care, and less is left for the widow.
  • Overall, women have fewer years of paid work and lower career earnings. In the allocation of family responsibilities, women often assume more of them, at home and in caregiver roles over many life stages. However, they may spend their later years alone, and they need to plan for their future security.
  • On a societal basis, women experience higher long-term care costs. They are more likely to need help with the activities of daily living later in life. But they will likely be alone, whether widowed, never married or divorced. Therefore, they are less likely to have a family caregiver.
  • Mothers are the first line of help for their children and are extremely devoted to them.
  • Many women have trouble thinking about their needs first, or at the same time others have needs, with the result that their needs become secondary or may even be forgotten for long periods of time.

Lessons Learned From Retirees  

The Society of Actuaries Committee on Post-Retirement Needs and Risks (CPRNR) has recently conducted focus groups with financially resource-constrained retirees retired for more than 15 years as well as those retired more recently. Focus groups were conducted separately by gender. The CPRNR has also surveyed retirees and near-retirees with regard to post-retirement risks, with the surveys conducted every two years starting in 2001. Some of the findings from this work include:

  • Gaps in knowledge and misperceptions are very common.
  • People commonly deal with things as they happen, rather than anticipating and planning for financial shocks.
  • Retirees are very resilient and adapt to many unexpected changes and shocks.
  • Widows often adapt quite well.
  • Divorce after retirement and a major long-term care event cause major financial disruption.
  • Some retirees make very large gifts to children when the child loses a job or experiences major problems.
  • Dental expenses and home repairs are major items of unexpected expense for retirees.
  • Women are much more likely to be caregivers and to time their retirement because of the caregiving needs of others.
  • Women are more concerned about retirement risks.
  • Many people have retirement planning horizons that are too short.
The decisions that people make throughout life can lead to inadequate savings for retirement and a need for long-term care without resources to support it.