When it comes to planning for retirement, women feel less prepared than men. That’s according to the New Retirement Mindscape® 2013 City Pulse index survey, commissioned by Ameriprise Financial. Only 38 percent of women surveyed as part of the study say that they feel on track for retirement (or the remainder of retirement) compared to 46 percent of men.
Women’s lack of confidence in the realm of retirement readiness may be tied in part to planning. Seventy-five percent of men surveyed report that they’ve done at least some preparation for retirement, compared to 70 percent of women. And over half of men (55%) say they’ve contributed to a 401(k) plan, while only 47 percent of women claim they’ve done the same.
What accounts for the gender divide? It may have to with the fact that women often face unique financial hurdles on the road to retirement. Three big ones include:
1. Women are often the ones to take time away from work to care for children and ailing parents. While caregiving is important and often the best option for a family’s situation, the reality is that spending time out of the workforce – whether to raise children or to provide care for a family member – can have a negative impact on one’s earning potential. There’s no question that this work is admirable, but it’s important to factor in the implications that it may have on long-term financial goals. Women (and men) who anticipate pausing their careers at some point in time to focus on other priorities should consider setting aside extra money at other times when they’re able to do so, in order to offset the loss of income.
2. In general, people are living longer, but on average women live longer than men. This results in the need for additional retirement funds and increased health and long-term care costs. Yet, unfortunately, it appears that few people have a handle on how much they need to set aside. Only 15 percent of women surveyed in the New Retirement Mindscape survey say that they’ve estimated the amount of money they’ll need during retirement to pay for healthcare, compared to 21 percent of men. Not only is it important to determine the amount of money you’ll need, it’s also critical to take action. Create a plan for how you’re going to handle healthcare expenses.
3. Women tend to be more conservative with investments. While this may not be all bad, defining and taking the appropriate amount of risk with your investment portfolio may be beneficial. As with many things in life, it’s important to have a balanced approach to your investment portfolio.
Gender aside, people are feeling unprepared for retirement. As more baby boomers approach retirement age – nearly 10,000 turning 65 each day – planning and preparing for retirement is becoming increasingly top of mind. With fewer years left to build up your nest egg, it’s important to focus on what you can control. Here are five steps you can take to feel more prepared for retirement:
1. Think about what you want retirement to look like for you and your significant other. Do you want to travel? Relocate? Spend more time with your grandkids? When you have a clear vision of retirement, it’s easier to determine what it will take to get there.
2. Take advantage of employer-sponsored retirement plans. Make sure you’re maxing out your 401(k) contributions if you’re able. If you’re self-employed, take the time to establish your own retirement plan.
3. Consider purchasing long-term care insurance.
4. Take an honest look at your expenses. Break them into two categories – essential and lifestyle expenses. Determine if there’s anything you could forego on the lifestyle side.
5. Focus on saving more, especially while you’re still working.
Planning for retirement is complex and at times can feel overwhelming. And it’s not the same for everyone. Each person’s situation is unique. A “must have” in retirement for one person may not be important for another person. The key is outlining your goals for retirement, and then determining a path to get there. Consider meeting with a financial advisor who can help you with this.