Four Reasons Women Run the Risk of Outliving Their Money

– And What You Can Do About It
Kathy Longo, CFP®, CAP®, CDFA Wednesday, 25 September 2019

Four Reasons Women Run the Risk of Outliving Their Money

Money can be a complicated topic for many women, and too many avoid learning enough about their finances to feel secure and informed. If you count yourself in this category, it’s important to begin thinking about your retirement plan since women are much more likely than men to run out of money in their retirement years.

Why It Happens

There are four main contributing causes to this startling statistic:

  1. Life Expectancy: Women have greater life expectancies than men, making it likely they will outlive their spouses – oftentimes by a decade or more.
  2. Medical Expenses: Living longer often equates to increased medical expenses, including things like nursing home care. You can’t count on Medicaid to pay for this; the government will only cover this type of care once your savings are nearly gone.
  3. Extended Career Hiatus: Women tend to be the ones to take time off to raise children, which has a detrimental effect on their finances in two ways: fewer years to generate income and savings, and fewer years paid into Social Security.
  4. Wage Gap: Despite a growing movement for equal pay, women are still paid approximately 16 percent less than men for doing the same jobs. This wage gap is magnified for women with children, which is commonly called the “mommy penalty”.

The Most Vulnerable Populations

These four risk factors are of even greater concern for women who fall into the bottom quarter of wage earners and are starting out with lower income and less savings than their higher-earning counterparts. In addition, women who are “suddenly single” may feel in the dark and ill-informed about finances if their spouse previously handled these matters.

Though uncommon among professional financial advisors, predatory practices by bad actors can magnify the financial struggles vulnerable women face, making it all the more important to learn as much as you can in order to protect yourself.

What to Do About It

Though you may be fighting an uphill battle as a low wage earner or a suddenly single woman, don’t despair – it’s never too late to implement proper planning practices and get yourself on a firmer financial footing for your retirement years.

If you’re still working, take control of your finances with the following steps:

  1. Live consistently below your means and save as much as possible. Automating your savings ensures you won’t be tempted to overspend.
  2. If your health allows for it, consider working past the age of 65 for as many years as possible in order to increase your savings and Social Security credits.
  3. If your current cost of living is challenging to your retirement goals, consider downsizing or moving to a more affordable area. If you have family or friends you’d like to see more often, consider whether you could make a move to a more cost-effective location and have the added benefit of more time with the people special to you.
  4. Take full advantage of any defined contribution plans your employer matches, and defer the maximum amount allowable. Too many women leave money on the table and regret it later.
  5. If you don’t have access to a retirement plan through your employer, consider an IRA or Roth IRA for retirement funding vehicles you can open and control yourself. A Roth IRA is ideal, though you won’t qualify if your income is more than $122,000 in 2019 (or $193,000 in combined income if you are married).

Seek the Guidance of a Financial Advisor

Whether you are still working, or you are already in retirement and find yourself “suddenly single” and dealing with both the emotional and financial fall-out from this significant personal loss, you may benefit from the guidance of a professional.

It’s important to seek the advice of a fee-only financial advisor who can help you create a more stable retirement footing. It’s best to avoid advisors who overpromise in their ability to solve all your financial problems, as well as those who attempt to sell you a financial product, such as an annuity. You should also be wary of any advisor who dodges your questions or doesn’t seem willing to take the time to help you learn more about your money and appropriate planning options.

The right financial advisor can help you sort out your finances, teach you more about financial and retirement planning, and provide a sense of confidence as you plan for your future.

It’s never too late to begin planning for a comfortable retirement free of financial stressors, and that is especially true for women. Take control of your financial future today and ensure you won’t outlive your money in retirement.

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About the Author

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.

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