Do Women Retire Differently?

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OCEAN CITY – Statistics tell a pointed story about the differences between women’s and men’s finances: On average, women still earn less, save less and invest more conservatively than men. They are also more likely than men to interrupt their careers so they can care for family members, resulting in lower lifetime savings. And according to a 2008 report from the U.S. Department of Labor, they are more likely to take part-time jobs that don’t offer traditional retirement benefits.

Compounding the problem, women live five years longer, on average, than men do — requiring their retirement savings to stretch that much further. For these and other complex reasons, women are typically less prepared for how they’ll spend their after-work years than their male counterparts. Too often, even in families in which the wife earns as much as or more than her husband and manages the day-to-day finances, she may have a tendency to delegate long-term planning and investing to her husband based on her comfort level with investing, says Katherine Roy, director of Personal Retirement Innovation & Planning in Bank of America Merrill Lynch’s Retirement Group.

Which is not to say that money and retirement aren’t very much on women’s minds. In a recent Merrill Lynch Affluent Insights survey of 1,000 people with investable assets of $250,000 or more, women consistently outpaced men when it came to financial concerns. While 42% of men said they were worried about the impact of the economy on their ability to meet financial goals, 56% of the women said they were similarly concerned. And half of all women said they were worried about their income not keeping pace with inflation, compared with 39% of men.

One of the best ways to dispel that worry is to get involved and take control, says Roy. Whether you’re married or single, pursuing a career or staying home to raise children, there are a few proactive steps that may go a long way toward ensuring that you — or your sisters, wife, mother, or daughters — are more financially prepared for a secure and happy retirement. Here are four that can get you started.

According to the Department of Labor report, just 45% of working women participate in a retirement plan. In some cases, that’s because they aren’t offered a plan where they work. But often it’s because couples decide to use the lower wage earner’s income (most often the wife’s) to cover day-to-day expenses, taking advantage of the higher wage earner’s ability to save more in a tax-advantaged account. Doing so can have a negative impact on the lower wage earner’s retirement security, cautions Roy.

That’s particularly true for women, who often outlive their spouses — or experience a severe income drop after divorce. Additionally, the tendency for women to drop in and out of the workforce to take care of children or other relatives can deprive them of the benefits of 401(k) savings and Social Security credits.

Anyone who doesn’t have a retirement plan at work or who leaves the workforce for a period of time, should talk with their financial advisor about setting up ways to compensate for lost retirement savings, suggests Roy. Stay-at-home moms (or dads) can and should open a spousal IRA.

"Couples can start by putting a dollar figure on the stay-at-home parent’s contribution to the family’s welfare — ask themselves how much they’d be spending in daycare if both partners worked — and save as much of that amount as possible in a separate account," she suggests.

That and other savings strategies can help to fill the savings gap created by taking time out of the workforce.

(A Merrill Lynch Wealth Management Advisor. She can be reached at 410-213-8520.)

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