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by Eve Kaplan, CFP(R) Practitioner

“Men are from Mars, Women are from Venus” is alive and well in the financial world. Data continue to underscore differences between the sexes when it comes to financial matters. While both men and women face a retirement funding crisis in this country, I will dwell on specific planning issues that affect women differently from men.

1. Women save less for retirement:
Women earn less than men and have less saved for retirement. Some studies indicate women in the US earn 5% less for the same job and 23% less – on average – since they hold lower paying jobs. Further, women are more prone to interrupted jobs and careers since they are the primary caregivers for small children and the elderly. More time out of the work force and lower paying jobs mean less money saved for retirement.
If a woman is married – and remains married to a man – male/female differences may be mitigated if all resources are pooled. Accordingly, single, divorced or widowed women may be at higher risk of outliving assets than married women.

2. Women live longer than men:
It’s wonderful to live a long life if it doesn’t raise the risk of outliving one’s assets! Since women save less for retirement AND live longer, the risk of outliving assets is higher for women. A trip to any nursing home highlights how many residents are women. But there’s a bright spot when it comes to company pension pay-out alternatives. Although women outlive men, federal law mandates the use of unisex actuarial tables for pensions. Since women live several years longer than men, they will receive more pension payments than men born the same year. Put another way, women may have further reasons to forgo a company lump sum payment in favor of a monthly pension stream of payments. An advisor should be consulted at all times (for both men and women) before making a decision.

3. An increasing percentage of women are the sole breadwinners for their families:
The economic downturn that began in 2008 has been less kind to men than women. Further, more women are reaching top levels in their chosen profession as boomers reach their final work years. As a result, the number of women who are sole breadwinners for their families is increasing. Yet women show less confidence – and worry much more — when it comes to making financial decisions than men. Women benefit from professional, objective (non-product driven) financial support as long as it is not delivered in a patronizing manner or women are ignored.

4. Women score more poorly in terms of financial preparedness and knowledge:
A financial literacy gender gap study (2011-12) by Financial Finesse shows women are more likely than men to leave credit card balances unpaid. Women also have fewer emergency savings funds set up and have a poorer understanding of stocks, bonds and mutual funds than men.

How does this affect the financial planning process?

1. Pensions and social security: professional input regarding retirement streams of income is critical for women since they run a higher risk of outliving their assets.
2. Lower self-confidence and a poorer understanding of financial matters means women can especially benefit from non-patronizing financial advice by a fiduciary who puts the clients’ interests before his/her own interest. A good example is a fee-only (no products sold) Certified Financial Planner™.
3. Long-term care insurance is especially important for women. Half of Americans may need nursing/long-term care (at home or at a facility) but the percentage is higher for women than men.
4. Women may be better candidates for selective purchase of “longevity insurance.” These are deferred-income annuities that begin to pay benefits when the annuity holder is e.g. 80 or older.
5. Professional advice: Women are more receptive to financial advice as long as they are not patronized by advisors or strong-armed into buying products they don’t understand (or necessarily need).

My next column will discuss key gender differences in attitudes toward money. These differences have a HUGE impact on the multi-billion dollar financial services industry.


(C) Copyright by Eve Kaplan 2012. All rights reserved.