Ten years ago, the average life expectancy for a woman retiring at 65 stretched to her 84th birthday. With the right planning and investments, all financial concerns would be good and paid for.
The problem is, that isn't happening. According to the Wells Fargo Retirement Fitness Survey, released in December, Americans have less than 7% of their required retirement nest eggs saved. And with women's life expectancy going up each year, the task of managing retirement funds so as not to outlive her assets is increasingly becoming a woman's problem.
A recent barrage of reports-from Ameriprise, Merrill Lynch, Wells Fargo and more -have brought the female issue to the forefront as the first of the Baby Boomers are reaching retirement age. Claudia Fine, chief professional officer at SeniorBridge, a geriatric care management firm, pinpoints the trend: "People are talking about the fact that women need to be better educated, take our heads out of the sand. That we need to grow up and take responsibility for our financial lives."
"It's very clear that people don't plan for a long enough period of time of retirement, says Anna Rappaport, co-author of a study from the Society of Actuaries that shows that 92% of female retirees are not planning long-term to cover an estimated 20-year gap in financing their retirement because they are living longer. "And while planning horizon is not just a woman's issue, her longevity and particular life circumstances that are common for women make it a particular challenge for women."
The financial impact of the loss of a spouse and the healthcare costs associated with aging took center stage in the study. "The reality of women living longer than their spouses, and the likelihood of spending their latter years in a debilitated state of multiple chronic illnesses, may not be things we like to talk about, but they are often the biggest challenges that face women in retirement," says Fine.
THE ISSUE: "Couples not understanding the impact of widowhood on a spouse is really concerning," says Rappaport, who notes that 85% of women over age 85 are widows, compared to 45% of men. "There's a failure to focus on the fact that there's a significant financial decline at the time of widowhood."
"Unless a couple has a lot of money, when one spouse dies and doesn't leave any transitionary financing into widowhood, it poses a tremendous hardship on the surviving spouse," says Rose Greene, a Santa Monica, Ca. based financial planner. The Actuaries study reveals that 35% of male pre-retirees believe that their spouse will be better off if they were to pass away before her, which, according to the authors, is simply not the case. Because women have longer life expectancies and often marry men several years older than themselves, periods of widowhood of 15 years or longer are not uncommon. For many, the death of a spouse is accompanied by a decline in the standard of living.
THE ADVICE: "Take the time to understand your finances," advises McNutt. "Once a year conduct a retirement analysis. Look at what you own, your spending needs and determine if what you have is going to accomplish those needs." What may seem like obvious advice is a crucial step for women to take in ensuring quality of life in retirement-both with her spouse or after she is on her own. Single women, of course, are on their own, which only increases their responsibility at making retirement planning a priority.Keep reading at ForbesWoman for additional advice for retirement planning concerning the loss of a spouse
THE ISSUE: According to the Society of Actuaries report, an analysis of the National Long Term Care Study shows that 30% of the residual life expectancy at age 65 for women were spent in a state of chronic disability (in comparison to 20% for men). Women, then, are likely to have a longer period of life where they will require assistance from a long-term care facility or from a paid caregiver. Elizabeth Bunk, a CPA with Weaver and colleague of McNutt, cautions women of just how "tremendously expensive" this care can be, especially as women enter their 80s and 90s.
THE ADVICE: Buy long term care insurance as a part of retirement planning. Fine, McNutt, Rappaport and Bunk all agree that this is the best practice for women in their 50s who are beginning to seriously consider retirement. Bunk notes that while the early 50s isn't often a time when women are anticipating their failing health, she has counseled couples who haven't-and their finances have plummeted.
Fine's stance on long term care insurance is most convincing: "I don't want to pay for fire insurance either," she says, "but I do, and I hope I never need it. The truth is that I'm much less likely to have my house burn down than I am to need long term care.
Retirement planning for women is critical, particularly because they live longer lives than most men. Among the concerns? Outliving assets, financial vulnerability after the loss of a spouse, and health care. And where you live out your golden years matters. Here, the best states based on U.S. Census figures of cost of living and mean retirement income, percentage of women over age 65, percentage of population over age 85, whether the state has a government-funded Program for All-Inclusive Care for the Elderly (PACE), and the number of nursing homes. Because care of the body and soul are important, we also considered the number of nail salons and places of worship.
No. 1 California
Mean retirement income: $23,935
Female percentage of over-65 population: 57.3%
Nursing homes: 1,252
Houses of worship: 16,920
No. 2 New York
Mean retirement income: $22,123
Female percentage of over-65 population: 59.2%
Nursing homes: 640
Houses of Worship: 10,999
No. 3 Ohio
Mean retirement income: $19,028
Female percentage of over-65 population: 58.8%
Nursing homes: 961
Houses of worship: 11,166