On March 8, we observe International Women’s Day. On this occasion, thousands of events across the world will honor the cultural, political and social achievements of women. Of course, in many countries, women still face significant economic challenges. And even here in the United States, women encounter more obstacles than men in the pursuit of financial security, particularly in seeking a comfortable retirement lifestyle. So if you are a woman — regardless of your marital status — you will need to be aware of these challenges and take steps to overcome them.
Let’s consider a few of these challenges and some possible solutions:
Challenge: Women spend more time out of the workforce and accumulate less money in 401(k) plans.
Women spend an average of 12 years out of the workforce caring for children or elderly parents, compared with less than two years for men, according to the Social Security Administration. This time away from work can translate into less money in retirement plans — in fact, women’s average 401(k) balance is only about two-thirds as large as men’s, according to a study by Fidelity Investments.
Potential solution: Take full advantage of your 401(k) and IRA.
Your care-giving obligations are an issue to be decided by you, your spouse and perhaps other family members. But while you are working, contribute as much as you possibly can to your 401(k) or similar employer-sponsored plan. Also, try to fully fund your IRA each year.
Challenge: Women typically live more years in retirement and depend more heavily on Social Security.
Women reaching age 65 are expected to live, on average, an additional 21.6 years, compared with 19.3 years for men, according to the Social Security Administration, which also reports that the average annual Social Security income received by women 65 years and older was about $12,500. Furthermore, Social Security comprises about 50% of the total income for unmarried women age 65 and older, compared to just 36% for elderly men.
Potential solution: To become less dependent on Social Security, create a sustainable withdrawal strategy for your investment portfolio.
Social Security was designed to supplement one’s retirement income, not replace it. Consequently, it’s essential that you make full use of your other sources of income, such as your 401(k), IRA and other investment accounts. To make this money last, you’ll need to create a sustainable withdrawal strategy early in your retirement — and stick to it.
Challenge: Women are far more likely than men to need some type of long-term care.
More than two-thirds of nursing home residents are women, according to the National Center for Health Statistics. And the average cost for a private room in a nursing home is more than $87,000 per year, according to the 2014 Cost of Care Survey produced by Genworth, a financial services company. Typically, Medicare covers only a small percentage of these costs.
Potential solution: Prepare in advance for long-term care expenses.
Long-term care costs can be enormous, but you do have some protection-related options for meeting these costs. Check with your financial advisor to learn which of these choices might be most appropriate for your situation.
These aren’t the only financial issues facing women, but they do give you a good idea of what you may be facing. So, be proactive in meeting these challenges — because there’s actually a lot you can do.
Tye Hoffmann is an investment representative for Edward Jones Investments located at 974 N. Main St. in Tooele. He can be contacted at 833-9440 or at 830-0917.