How Advisors Can Better Serve Female Retirees

Advisors know that clients often view retirement planning as a minefield. Hence, they work with advisors. Another benefit of retirement planning with an advisors is that a professional knows, at least he or she should know, that one-size-fits-all doesn’t cut it when it comes to retirement planning.

Something astute advisors know that is that there are significant differences between retirement planning for married couples and single women – be they widowed or never married. No matter the scenario, women nearing or in retirement deserve and require bespoke service.

Various studies prove that women are, in aggregate, better investors than men and superior savers. That holds true regardless of the account – cash savings, IRA or 401(K). Women are also, usually, more conservative in their investment decisions than men and that's where opportunity for advisors to add value comes in.

Then there’s the point that, on average, women live longer than men. Additionally, women are more likely to spend time out of the workforce, likely denting retirement savings in the process.

Important Points for Working with Female Retirees

Advisors striving to provide top-flight retirement planning services to women need to understand the dynamics they face when it comes to investing and saving.

“Women’s earnings tend to peak earlier in life than men’s—and those peak average earnings are substantially lower—according to 2019 data, the most recent data available. In addition to broader wage inequality, this happens because women are more likely to reduce their paid work schedules or quit work altogether to devote time to unpaid caregiving for children or elderly parents,” notes Morningstar’s Christine Benz.

As noted above, some women spend time out of the workforce. Be it for raising children, caring for elderly reasons or other reasons, some don’t work for several years or more. Many don’t know – and this is where advisors come in – is that they can still contribute to individual retirement accounts (IRAs).

“In addition, women who have reduced or stopped working because of caregiving obligations can play catch-up further down the line. If they re-enter the workforce later in life and have the extra income, they could contribute more to their retirement accounts during the empty nest years,” adds Benz.

These are nuggets that many clients – regardless of gender – aren’t aware of, underscoring the value of advisors in the retirement planning process. There’s also the matter of Social Security. Due to the fact that men, on average, make more than women, they collect more from Social Security.

“Women who expect to have longevity on their side have every reason to delay Social Security claiming in the interest of enlarging their eventual benefit. And married couples should focus their decisions on maximizing lifetime income over both partners’ lives,” notes Benz.

Accounting for Shortfalls

An array of research and studies suggest women are more prudent investors than men and less willing to embrace unnecessary risk in the name of quick gains. That’s relevant to advisors because it can be inferred from that women will be receptive to income-generating assets.

It’s likely income could be an easy sell today with female clients because many are facing retirement savings shortfalls exacerbated by the coronavirus pandemic.

“The issues contributing to women’s lack of retirement preparedness existed long before the term ‘coronavirus’ entered our vernacular. But the pandemic certainly put it top of mind, as women increasingly needed to interrupt work and use savings to care for loved ones,” concludes Benz.