How women can take control of the retirement income gender gap
Women are a force to be reckoned with in the economy. They own 10 million businesses in the U.S., control an impressive $11.2 trillion in investable assets and are increasingly the primary breadwinner and financial decisionmaker in households.
But this clout is not carrying over when it comes to retirement planning. According to the Prudential’s 2018 Financial Wellness Census, women lag behind their male peers by an average of 43 percent in retirement savings. What makes this trend even more worrying is the fact that by age 85, women outnumber men by two to one.
When comparing balance sheets, men have an average of $203,000 saved up compared to the $115,000 saved by women, according to the census findings. Only 38 percent of women are certain how much monthly income they’ll want to have in retirement.
A new mindset for retirement planning
Given these unsettling statistics, it’s clear there’s much to be done to help women enter retirement secure in the knowledge they can afford the retirement lifestyle they desire. For example, for women, financial security after the death of a spouse was a top concern cited in the census. On the other hand, for men, this consideration did not appear in the top three.
Traditional approaches to retirement planning look at only one facet — retirement savings. But you don’t look at the value of your current job by thinking about the total amount of money you’ll bring in over a 15- or 20-year career.
So why would you approach retirement this way? Instead, just like you think about your household budget today, it’s more useful to reframe retirement planning to think about the monthly or yearly income you’ll need to live the lifestyle you want.
Kent Sluyter, president of Prudential Annuities, says the retirement planning discussion has traditionally focused on accumulating assets for retirement, rather than how consumers can turn savings into a steady income stream that can sustain their lifestyle in retirement.
“People who have worked hard to save for retirement need to be educated about not just financial planning but also retirement income planning and how to protect a portion of their retirement income so they can live the life they earned,” said Sluyter.
With the right guidance, women can develop an income strategy to help them prepare to live in retirement. Still, 66 percent of women don’t work with a financial adviser, either because they say they can’t afford it (42 percent) or they don’t have enough financial assets (26 percent), according to the census.
When it comes to ownership of the various financial products available to help people invest in their future income needs, women again lag behind. To cite a few examples, 29 percent of women own individual retirement accounts, versus 34 percent of men. One in five women (19 percent) own mutual funds compared to one quarter of men.
One financial product that can provide a guaranteed income in retirement is annuities, yet only 7 percent of women have chosen this route.
This lack of adoption around annuities suggests that women have not been made aware of how these guaranteed income products can alleviate many of their concerns around outliving retirement savings and having a consistent income stream throughout retirement.
“Annuities can be a powerful tool to help women create a steady stream of retirement income to supplement other savings,” said Melissa Kivett, Senior Vice President, Chief Marketing and Customer Experience Officer for Prudential Individual Solutions Group. “For anyone, getting the right financial advice before buying an annuity or any other financial product is critical. For women especially, who are increasingly bearing more responsibility as primary wage earners, and being the ‘CFOs’ of their household, it is even more important to help close the retirement income gap.”
Two dozen of the leading financial services companies, including Prudential, recently established the Alliance for Lifetime Income to address this issue and with a goal of promoting greater understanding of how annuities can protect and grow retirement savings. According to the forthcoming Alliance Protected Lifetime Income Index Study, only two out of five Americans have some protected retirement lifetime income in the form of a pension or an annuity.
If you’re interested in learning whether annuities would fit in with your retirement strategy, a financial planner can be a helpful resource. To learn more, visit prudential.com.