Financial planning for women is different than how it works for men. Reason 1: Women live longer!
This is a series of three articles: #2 will cover women making less money than men, and #3 will cover women staying out of the workplace to care for the family.
It’s a well-known fact that women live longer than men. That means we, as women, need to plan to have our money last longer in retirement than men.
There is an automatic assumption built into most financial planning software upon planning for a hetero couple. The software assumes that a woman, who is the exact age and has the same health indicators as her male partner, will live at least two years longer.
Coupled with living longer, a January 2020 Pew Research Center study found, among hetero couples in the USA, women are 2.2 years younger on average than their male spouse.
Financial planning for women – do the math!
Doing the math, this means the average female partner in an opposite-sex relationship needs to plan on having at least 4.2 years of additional funding for her solo retirement years.
Let’s take the example of a hypothetical couple, Dick (age 60) and Jane (age 57.8). Together they currently make $200,000 per year and are planning on living on $130,000 (in today’s dollars) when they retire in a few years.
Given the calculation above, that means Jane should plan on having her money last at least an additional 4.2 years after Dick dies. What that does NOT mean is that we can simply split their anticipated $130,000 per year in expenses in half.
Just because Dick no longer lives in the house doesn’t mean that the mortgage payment, property taxes, or insurance drop by one-half. Just because Jane will now be traveling alone doesn’t mean hotels will let her pay half price for a room.
And now, if Jane now drives places alone it doesn’t mean the mechanic or gas stations are willing to cut her a break in what they charge. (You get the picture here!)
Longevity is in the equation
Let’s say Jane will need to live on $91,000 per year when Dick leaves her a widow. So $91,000 x 4.2 years equals an additional $382,200 that Jane will need through the end of her life. Knowing this information, Jane (and her caring partner Dick) can and should plan for this need for Jane in her future.
Beyond saving more, working longer, and/or spending less,
I can help women plan for a long(er) and comfortable retirement. Together, we can create an individualized plan to get there. Using strategies including maximizing Social Security benefits, tax planning opportunities, long-term insurance needs, reviewing investment returns, and more.
Click here to initiate a conversation with me to discuss financial planning for women. Learn how you can start planning for a long(er) and comfortable retirement!
As a financial consultant, specializing in the financial needs of women, Kathleen Connors understands that you want to work with an adviser who is relatable and trustworthy. She focuses on life’s unique goals and takes the time to educate her clients about their financial future. Kathleen is passionate about helping women reach clarity and confidence around their finances. It doesn’t matter where a client may be within their life’s journey. Kathleen brings warmth and compassion to the financial planning process, with no judgments.