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One need not have masters in actuarial sciences to know that women live longer than men. According to life expectancy data from the Centers for Disease Control (CDC), the average lifespan for an American is 76.5 years, but it’s about five years higher for a woman.
How one views the potential expansion or lack thereof of longer lifespans is an individual matter, but advisors and clients alike know that there are challenges that come with increasing longevity. Clearly, it’s an issue with financial ramifications, particularly for women. And yes advisors, some of that has to do with the great wealth transfer.
Advisors often look at the great wealth transfer as a generational concept and it is, but it also pays to examine how this massive shift of capital will affect men and women. Specific to the latter, it’s estimated that helped in part by the great wealth transfer, women will control $30 trillion in assets by 2030. That’s not that far off.
Still, advisors should be careful to note that opportunity as it relates to women and increasing wealth isn’t just about sheer asset accumulation. To their credit, many female clients and prospects are aware of the aforementioned life expectancy data and they want to take today to shore up retirement planning because they’re concerned about outliving their assets.
Closing the Confidence Gap
As Meghan Dorr, head of retirement service at J.P. Morgan Asset Management, points out, women are cognizant of longevity risk. Data indicate “71% of women vs. 58% of men” are worried about outliving their savings.
Some of that gap is attributable to a confidence gap. While younger women are increasingly interested in investing and confident about that pursuit, the same isn’t true in the age groups that are closer to retirement. Worse yet, the confidence gap widens when comparing married and unmarried women. That’s something for advisors to be aware due to increasing rates of gray divorce and many women staying single longer.
“Among married workers, 69% of women report being somewhat or very confident about retirement, compared with 85% of married men,” observes Dorr. “Among unmarried workers, the confidence gap widens further—44% of women are somewhat or very confident versus 65% of men.”
Regarding the need for advisors and women to get moving on the longevity issue is some important math. As noted at the start of this piece, the CDC says the “average” American woman will live to be about 81.5 years old. But as Dorr notes, a 65-year-old woman has a 54% chance of living to at least 85 and if she’s healthy (not a smoker) that probability surges to 73%.
Said another way, nearly three-quarters of today’s healthy 65-year-old women are on track to outlive the CDC life expectancy by nearly four years.
Planning Matters
With longevity top of mind for many women, there’s added emphasis on issues such as estate planning, investment strategy, long-term care and Social Security. Women should focus on staying engaged and the elements in retirement planning they can control.
Those objectives can be accomplished in solo fashion, but the best way to derive a comprehensive, confidence-building plan is to work with an advisor.
“Understand how longer life expectancy coupled with potential career breaks, as well as persistent pay and wealth gaps, are distinctive challenges for women that tend to intensify over time,” concludes Dorr. “Which is why it’s especially important for women to make proactive decisions regarding budgeting, saving and investing.”
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