Women: 5 Key Reasons Your Retirement Is at Risk

Last Updated Dec 13, 2010 11:34 AM EST

According to a report just released from the Society of Actuaries, women have special retirement planning needs that are largely being ignored. The report, titled The Impact of Retirement Risk on Women, offers details on why it's particularly critical that women, who outlive men by three to four years on average, understand -- and act on -- the post-retirement risks they face.

Here are five key reasons your retirement could be at risk, according to the report:

Reason #1: Planning horizons are too short. Most women can expect to live 20 or more years after age 65. However, nine out of 10 women in retirement or close to retirement don't plan nearly that far into the future.

Reason #2: Outliving assets is a risk. On average, women live 20 years after age 65, while men live 17 years. So women are more likely than men to outlive their assets. In fact, four out of 10 women over age 65 who are living alone depend on Social Security for virtually all their income.

Reason #3: Married women need to prepare for widowhood. Because men tend to marry younger women, and women tend to outlive men, periods of widowhood of 15 years or more are not uncommon. The numbers show that 85 percent of women over age 85 are widows, while only 45 percent of men over age 85 are widowers. Yet there's a planning disconnect here. Only seventeen percent of female retirees and 27 percent of female pre-retirees said they would be worse off if their husband passed away; the majority of married women think their financial situation would be the same or better if their husband passes away. However, the reality is that most widows have significantly lower income after their husband dies.

Reason #4: Women need to plan for long-term care. Women are more likely than men to have chronic disability in their later years and need care in a long-term care facility, or need a paid caregiver. The expected average value of the cost of lifetime long-term care services is $29,000 for males and $82,000 for females, although these amounts can get far higher for some people.

Reason #5: Women have a greater need to plan for medical expenses. Retirement incomes are generally less for women than for men, but they don't have lower health care costs. And women are less likely to have medical insurance from their employer, compared to men.

"This report underscores the need for women to understand the full-blown drama of retirement," says Cindy Hounsell, president of the Women's Institute for a Secure Retirement (WISER), which co-sponsored the report with the Society of Actuaries. "For most women, there's little room for error, and being unprepared for nearly a third of their lives will have consequences."

What You Should Do
So what kind of retirement planning should be done by women (and their husbands if they're married)? First, women need to be significantly involved in planning for their future. Too often, I hear women say "My husband does all our retirement planning." Well, maybe he's doing a good job or maybe he's not, but regardless, if he dies first, you're the one who's going to have to live with the results. Recognize that the decisions you make -- or that your husband makes -- at retirement will have a lasting impact on your financial security. Do your homework carefully.

Here's a quick summary of the planning you'll want to do:

Is this hard work? You bet! That's why so many men and women don't do the necessary planning. It's easier to put it off to tomorrow, then the next day, then next week ...and before you know it, you're in your sixties or seventies without a good plan in place. Then you're in trouble, with limited options.

A good friend of mine, Patti Houlihan, a Certified Financial Planner (CFP) who runs her own financial planning firm, sums it up nicely: Plan, plan, plan. Life will be so good if you do.
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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.