Single Women Planning for Retirement Face Unique Challenges

Saving and planning for retirement is tough enough in general but the deck is stacked against women in four important but not insurmountable ways. 

In many ways, single women face the same problems as men when they consider how to retire with enough income, with one exception: they worry more. Their worry is not misplaced. For one thing, it is more difficult for a single person to save than it is for a couple. And when one member of a two-earner couple losses a job or gets sick it presents difficulties- but it’s not as challenging as when you are the sole breadwinner in a household. Simply put, women face more financial hurdles than men. Women earn less than men even doing the same jobs. Also, women are almost twice as likely as men to work part-time, either for their entire work lives or for a part of their careers. Women represent almost two-thirds of the part-time workforce. As a result, women tend to accumulate fewer savings for retirement.

Fewer Years in the Workforce

Another key to retirement asset accumulation is the number of years in the workforce and tenure at each job. Women tend to spend more time out of the workforce as a consequence of caring for young children as well as caregiving for the family members. Because retirement income depends on the benefits that accrue throughout one’s working life, fewer years in the workforce translates to less pension income. An additional factor for defined benefit plans is the length of employment with the same company. Employees with longer service can earn significant benefits, but those who leave the employer before the end of the vesting period earn nothing. 

Longer Life Expectancy

Women live longer than men. Their longer average lifespan means that their retirement savings must be stretched over a longer period. Women need more savings at retirement to provide the same amount of income as men throughout their lifetime. On average, a 70-year-old woman can expect to live more than two years longer than a man. That may sound like a lot, but for an annual budget of $50,000 plus inflation, that could require another $100,000 or more in savings. 

This extra life span also results in additional medical costs. Women need to plan for the likelihood of needing long-term healthcare later in life. More women reside in nursing homes than men – 67.9% of long-stay residents were women. According to Genworth’s Cost of Care Survey, on average in the United States, a private room in a nursing home costs $8,365 per month, or $275 a day. For Semi-private rooms, the average cost of a nursing home is $7,441 per month, or $245 a day. That is a lot of money to pull from an already strained nest egg. 

Lower Social Security Benefits

The average Social Security check for a woman is $375.81 less than the average man’s. Aside from the well-documented wage gap, women often leave the workforce to care for children and elderly parents. Taking family leave directly impacts a woman’s earning potential. Studies have shown that a woman’s pay drops after the birth of her first child. The amount you’ll receive from Social Security is a calculation based on your 35 highest-earning years. If the years that women spend caring for the family members results in reduced earnings or even zeros, because they worked less than 35 years, then their Social Security benefits will be smaller. 

Investment Attitudes and Savings Habits

Women tend to save less than men do. There are many reasons why women don’t save as much as their male counterparts, it’s possible they don’t prioritize saving due to budget constraints. A Willis Towers Watson survey found that although men and women acknowledge it’s important to save for retirement, women are not placing as high a priority on setting the dollars aside. According to an analysis of the five million participants in Vanguard’s defined contribution plans in 2018, 60% of their participants were male. As for Individual Retirement Accounts (IRAs), although more women than men contributed to them in 2017, the total amount of men’s contributions was 23 percent high than women’s, according to the Internal Revenue Service. The average woman would need to save $1.25 for every $1 a man invests in retirement savings just to build an equivalent nest egg, according to a 2017 Nerdwallet data analysis. 

Studies show that women tend to be more conservative with their investments- often taking fewer risks, overweighting cash and bonds in their portfolios generating lower returns than their male counterparts. 

Bottom line: women have to overcome a combination of savings, Income, and Time Out of the workforce gaps. 

What can you do? 

Here are some ways you can improve your odds of a successful retirement: 

Plan to work longer: working a few additional years, retiring at the age of 67 instead of 65 will make a significant difference. Not only will the additional years of income boost savings, but you’ll also have more time for pensions and Social Security. 

Review and Ramp Up Your Retirement Savings: put yourself first. Save a minimum of 10% of your income in retirement vehicles. Work with an advisor to determine your capacity for risks. Balance your time horizon with your need for growth. If the stock market’s ups and downs concern you, there are investment accounts that are available today to allow you to participate in the market in market gains while guaranteeing you that you will never lose money even if the stock market goes down. The key here is to understand what constitutes “smart” risk which means investing in a diversified mix of investments that match your personal circumstances. 

Protect Yourself From Health Risks During Your Working Years: as the sole breadwinner, single women can’t afford to miss a paycheck if they were to become too sick or hurt to work. Take advantage of your employer’s disability insurance plans if they are offered. You can also self-insure with today’s updated life insurance policies. There are policies available that allow you to access the death benefit tax-free if you experience a chronic or critical illness. 

Minimize taxes: build a retirement that focuses on Net Spendable Income. If your employer offers a Roth 401(k), consider allocating both your annual contribution and the company’s match to a Roth 401(k). Look into Roth IRA conversions to shift savings from IRAs that are guaranteed to be taxed in the future into an account that compounds tax-free- a precision commodity based on what’s expected for future tax rates. 

Defer Social Security: each you postpone Social Security benefits after your ‘full retirement age (FRA) will boost your monthly benefit by 8%. There’s a cap at age 70, so that might be a good age to begin. Claiming benefits late results in a permanent benefit increase.