The United States is facing a retirement deficit between $6.8 and $14 trillion, according to the latest research from the National Institute on Retirement Security. Unfortunately, the situation is even more precarious for women: The Employee Benefit Research Institute’s most recent analysis of retirement readiness showed the shortfall reaches $62,734 for single females on the verge of retiring, compared to $33,778 for single males and $19,304 for married individuals. The same pattern applies to current retirees as well as Gen Xers.
All those scary numbers aside, many women – including single mothers, divorced women, widows and primary caretakers – face a unique set of challenges when it comes to planning for retirement. The long-standing tradition of the male as the "head of household" and "bread-winner" often leads some women to relinquish a portion, if not all, of their power when it comes to managing their family's finances or their own personal finances.
However, in the end, men and women alike want the same thing: a stable future for their families and themselves with a sizable nest egg to rely upon.
Let's examine some of the ways women can achieve retirement success.
1. Don't Forget About Yourself
Many mothers would gladly contribute to their children's college funds before contributing any money to their own retirement accounts. I can't blame them. It's our parental instincts and hopes for our children that drive us to do this. However, it's equally as important to be on a steady track to retirement. Otherwise, our children will wind up being the ones taking care of us.
Sometimes, to help those around us, we have to help ourselves first. Especially as women have longer life expectancies than men, they must stretch their retirement savings further than their male counterparts typically do. One simple solution is a spelled-out retirement plan, including your long-term goals, risk tolerance and expectations for retirement. A conversation with a financial advisor can help many women come up with a personalized plan that accounts for all of the above.
2. Find Trusted, Qualified Advice
You wouldn't go to an eye doctor to fix your car, nor would you go to a mechanic for a medical checkup. So why is it I encounter so many women taking retirement advice from people who have no business offering it?
Now, I understand many women have a difficult time finding a financial advisor they feel they can trust. Many women are forced into a less active role when it comes to managing finances as a couple, leading to an unbalanced relationship with the family's advisor should the husband pass away. This is illustrated by the fact that more than 70 percent of women seek a new financial advisor after the death of their spouse.
Further, there's a severe lack of women in leadership roles in the financial planning industry, and it can certainly feel daunting for women to find someone they feel understands their own needs. This is one of the reasons I'm extremely proud to have my daughter, Christina, as a major part of our team. No one understands better about the challenges women face in financial planning and, better yet, how they can overcome those challenges.
3. Save, Save, Save
The simple truth is most people, regardless of gender, have not saved enough for retirement, and I believe we're in the middle of an American savings crisis. Add this to the fact that women tend to have lower lifetime earnings than men for a variety of reasons (e.g., they're more likely to work at part-time jobs and more likely to take time off to care for family members), and you have a recipe for uncertain retirement prospects for many women.
The single most important thing many women can do is to begin saving early, and make it a habit. Whenever you receive income, set aside a portion. Pay your future self. I can promise you certainly will not regret taking advantage of the power of compounding returns. Small savings can add up to a significant amount of wealth over time.
Women face many difficult challenges in making up the retirement gap. However, in my experience, all women can find the retirement they desire if they work hard and save diligently. We also know that everyone's situation is different. As with all of our clients, our listen-first approach means we're concerned with helping women achieve their financial goals, and not pushing them in a direction they're uncomfortable with. In an industry that sees so many female investors as easy marks, we're setting ourselves apart. We're different, and that's a good thing.