Why Financial Planning Differs for Women and Men

Financial planning tips for seniors can differ between genders

By Melissa Willets

Financial planning for seniors is not a one-size-fits-all formula, especially when it comes to gender. Men and women hit retirement age with vastly different experiences under their belts — and with very different bottom lines.

Financial planning differences between women and men

Senior women, having worked decades facing gender pay inequality, retire with less money on average. In fact, women will retire with two-thirds of the money of men. Of course, the gender wage gap is not breaking news, but when you take into account that women are likely to live three to five years longer than men, you can see where the problem lies. Women are, startlingly, 80 percent more likely to be impoverished by retirement age. Let’s dig deeper into why:

Salary differences

On average, women make between $0.78 and $0.80 for every $1 men earn for the same job. In that scenario, if a woman and man invest 10 percent of their salaries toward retirement, her money could last six years less than his, even though she’s likely to live three to five years longer, according to Ellevest, an investment company that focuses on women’s unique financial needs.

Life expectancy

As mentioned above, women earn less money but usually have to make it last longer due to their extended life expectancy.

Healthcare

Because women live longer than men on average, they face a higher health-care tab. A healthy 55-year-old woman may end up paying $79,000 more for healthcare over the course of her retirement than a man the same age simply for living longer, not because she consumes more healthcare in a year.

Peak salary timing

Women’s salaries statistically peak earlier, and they take time off from work for childbirth and childrearing — often during the peaks of their careers.

Gender debt gap

Women generally pay more for their accrued debt, and they’re less likely to default, which leaves less money for them to invest. Women also tend to invest less and later in life than their male counterparts.

Women are better investors

On the plus side, when they do invest, women are generally better investors than men, according to research from Fidelity. Among the reasons are that men tend to be more reactionary than women, who stick to their long-term investing goals. Still, women can be less confident when it comes to investing at all, which can hurt them.

All told, women stand to lose $1 million over a lifetime based on these factors.

Financial planning tips for seniors

Let’s look at financial planning advice all seniors should follow — and extra tips women should consider — as they plan for retirement.

Choose the right kind of financial advisor

You want a certified financial planning professional who acts as a fiduciary handling your money. A fiduciary is legally required to provide investment advice that is in a client’s best interest, rather than solely for a commission. You can find a financial advisor who works on a fee-only basis on The National Association of Personal Financial Advisors (NAPFA) site.

Tips for women: Eighty-six percent of financial advisors are men, and so-called gender-neutral investing tools fail women because they don’t account for earning differences between the sexes. You may want to either hire a female financial planning advisor or ask a male advisor questions to find out if he understands women’s unique investment needs.

Pay down debt

You have several options to help you pay down debt. You can consolidate your credit card debt into one monthly payment at a lower interest rate. You can use the snowball effect, where you pay off the balance with the highest interest rate first and then apply that payment amount to the next highest interest rate balance until its paid off, and so on. Whatever you choose, create a plan and stick with it.

Tips for women: Since women tend to pay more for accrued debt, it’s wise to eliminate those payments, especially high-interest “bad” credit card debts first.

Ask for more money at work

If you’re still on the job, it’s never too early to have this important conversation with your boss. If you succeed and get that much-earned raise, make the most of it by paying off debt or putting it toward your retirement accounts.

Tips for women: There’s been a lot of talk about the “Negotiation Gap” between the sexes, where women are less inclined to ask for pay increases. That can be true, but research also shows women ask for raises as often as men; they just don’t receive them as often as men do. So, before you head into your boss’s office, learn how to negotiate a salary, like other female leaders.

Include insurance in financial plans

Rising healthcare costs are concerning for all, especially considering what Medicare doesn’t pay for. One in three seniors say that they would be unable to pay for an unplanned medical expense, even if it were as low as $500. Such hardships can be diminished by filling in coverage gaps with supplemental insurance plans.

Tips for women: Because women face higher health-care costs by living longer than men, it’s even more important to not only choose the right Medicare Supplement insurance but also learn how additional supplemental insurance, such as Hospital Indemnity and First Diagnosis Cancer, can ease financial burdens.

Estate planning = financial planning

Estate planning is often thought of as a way to decrease decision-making stresses on your family after your passing. Of course it is, but it’s also a smart way to plan your finances — before and after your death. It forces you to list your assets; gather necessary documents, like a financial power of attorney; and decide how your finances will be distributed after you or your spouse passes away.

Tips for women: Again, because of women’s extended life expectancy and the gender pay and debt gaps, it’s even more important for women to plan for living alone during their senior years. A few ways to prepare for your spouse’s absence is to:

• Purchase Final Expense insurance to cover funeral costs, estate taxes, mortgage payments, outstanding debts, and even college funds.
• Double check that your home is listed as joint tenancy with full rights of survivorship, which means the house automatically goes to you when your spouse dies.
• Have an estate planning attorney and certified financial planner review your estate plan to avoid financial planning mistakes, like missing necessary paperwork or not handling tax issues properly.

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