What Can Women Do to Achieve a More Secure Retirement?

By Octavia Wealth Advisors

The average woman in the U.S. is likely to live a long life—about six years longer than a man—so preparing for the many years ahead can be critical. Yet, studies show that women often lag behind men when it comes to planning for retirement.

This is especially true of women in the baby boom generation, who now range in age from 59 to 77. But younger women also face challenges when it comes to achieving financial security. The reasons are many, and include:

  • Women still make less than men. This is the biggest issue, of course. In 2022, women typically earned 82 cents for every dollar earned by men in the U.S. Even when age and education are factored in, a pay gap remains that affects how much a woman can contribute to her retirement plan and, down the road, how much her monthly Social Security and pension benefits might be.
  • Women still are more likely to be the primary caregivers for their family. Even a limited absence from the workforce can impact a woman’s opportunities to advance her career, earn higher wages, and contribute to a 401(k) for retirement. Though more men are taking on the main caregiving role, the gender gap endures. According to the Bureau of Labor Statistics (BLS), labor force participation for mothers with children younger than 18 was 71.2% in 2021, compared to 92.5% for fathers with children in the same age range. Women also are more likely to become the primary caregivers for one or both aging parents, which can further hinder career growth during prime earning years.
  • Women traditionally have saved less for retirement. According to the U.S. Census Bureau’s 2018 Survey of Income and Program Participation(SIPP), about 50% of women ages 55 to 66 have no personal retirement savings. Women also typically have saved less: 22% of women have $100,000 or more in personal retirement savings compared to 30% of men.
  • Women are less confident investors. A 2021 Fidelity study on Women and Investing found that just one-third of women see themselves as investors, and the majority of female respondents said they don’t feel confident making investment decisions. However, the same study found that when women do invest, they actually outperformed men, on average, by 40 basis points or 0.4%.
  • Long-term care costs can also hurt women. Spouses generally care for each other for as long as they can as they age, but often when one spouse dies, the survivor (usually a woman, because women typically live longer) eventually will require outside care. The cost of that care can quickly eat up a widow’s nest egg, and the already-expensive premiums for a long-term care insurance policy are significantly higher for a woman than for a man.

It’s Time to Make a Plan

Nearly every woman will be solely responsible for her finances at some time in her life. Some women may never marry. Many will marry and divorce. And others may stay married for years or decades, but eventually lose their spouse. In that situation, they’ll end up with one monthly Social Security check instead of two, possibly a lower pension payment and, potentially, a higher tax bill when their filing status changes to single.

So, what can a woman do to improve her chances of achieving lasting retirement success?

  • She can start investing now to help build enough wealth to have a secure retirement. Women typically are confident about managing their family’s budget, according to Fidelity, and they’re generally good at saving outside their workplace retirement account. But many (particularly older women) feel they need more help when it comes to long-term planning and, especially, investing. The good news is, that help is out there—and more and more women are participating in their workplace plan and investing for their future.

She can create a financial plan that spells out her specific goals and how to reach those goals. Those goals may change as her life changes, but having a blueprint can increase a woman’s financial confidence and help her stay on track.

  • She can work with a financial advisor who understands her individual needs and can answer questions like:
    • How much should I be contributing to my retirement plan, and how can I play catchup if I’m behind?
    • How should I be allocating my retirement savings?
    • What strategies can I use to shield myself financially if I’m divorced or widowed?
    • What filing strategies can I use to maximize my Social Security benefits?
    • How can I prepare for long-term care costs so I can protect my hard-earned savings if I need extra help as I age?

Women have the motivation, the ability and, increasingly, the opportunity to overcome the obstacles that historically have put their financial security at risk. It’s never too late, or too early, to build a better retirement plan. Schedule time now with an Octavia wealth advisor who can help you get started.

Please see Important Disclosures.