Women remain far behind men when it comes to saving and investing for retirement. In fact, women’s retirement account balances are, on average, about two-thirds of men’s retirement accounts.
The gender pay gap and time out of the workforce to care for loved ones continues to contribute to the disparity. And because women live an average of six years longer than men, they are also likely to field more “curveballs,” -minor setbacks, or “cannonballs,” -major impacts including the death of a family member or close friend, a significant financial setback, becoming a caregiver, or the death of a spouse or partner in retirement.
As women continue to outlive men, this could become an even bigger challenge.
While this trend is worrisome, what is more concerning is that the poverty rate for Americans 65 and older is now above 10%, with women, those living alone, those age 85 or older, and people of color at the highest risk of falling below the poverty line.
Because of these financial shortfalls, more than half of retired women today have had to adjust their lifestyles due to financial constraints according to new research from Edward Jones and Age Wave.
The good news
Not everything is gloom and doom for retirees. According to the new study, the emotional journey of aging is positive for most of us with our sense of happiness, freedom, and resilience rising and anxiety falling after age 50.
Today’s retirees have a very different perspective on retirement than their parents. They see retirement as a whole new chapter filled with opportunities, challenges and adventures to explore. To thrive in this new retirement retirees need to do well in four interconnected pillars: health, family, purpose, and finances.
Nearly all retirees agree that health is even more important than wealth to thrive in retirement. It enables us to accomplish all we want in this chapter of life.
Though the definition of family is evolving, retirees report that however you define it, “family” is the greatest source of satisfaction, support and purpose in retirement.
Whether it is family or something else, finding your purpose is the key to happiness in retirement according to today’s retirees. Those with a strong sense of purpose are happier, healthier, and live longer.
Managing money in retirement can be more difficult than saving for it. However, financial well-being provides peace of mind and the freedom to live the life we want to live.
Making course corrections across the pillars of retirement
The key to weathering tumultuous times and thriving in retirement is preparation, flexibility and a willingness to course correct to manage the curveballs and cannonballs life throws at us. Our research shows that the vast majority of retired women have made course corrections in retirement related to their health (93%), relationships with family and friends (90%), and sense of purpose (81%).
The most impactful health course corrections include becoming more physically active, reducing stress levels and alcohol consumption, maintaining a meditation practice, and mentally challenging ourselves. We also found women retirees are more likely than men to challenge themselves mentally (73% vs 62% of men), an important preventive measure as women are twice as likely as men to develop Alzheimer’s/dementia.
Family-related course corrections include setting boundaries with family members and 44% of women retirees who made these corrections say that it improved their quality of life significantly. Women retirees also reported that limiting time spent with toxic family members and friends, and spending more quality time with loved ones is having a positive impact on their lives.
Volunteering can provide an excellent source of newfound purpose in retirement. While both retired women and men are similarly likely to volunteer in retirement, women report more physical, emotional, and social benefits than men from doing so. What great proof that doing good is good for you.
However, when it comes to finances, women are making far too few proactive course corrections to ensure financial security and weather the curveballs and cannonballs in retirement. Today’s retired women have made fewer proactive financial course corrections then men, including the fundamentals such as reducing or eliminating debt (48% vs. 54% men), adjusting investment mix (29% vs. 41%), and getting financial education and advice (27% vs. 33%). They are also less likely to be working with a financial adviser (24% vs. 32%).
Financial course corrections can make all the difference between thriving and struggling in retirement. Fortunately, women are open to making these course corrections to ensure their retirement security. For example:
- Nearly half (47%) of women retirees and three-quarters (77%) of preretirees are willing to work at least part-time in retirement to increase their income;
- To reduce expenses, nearly half (43%) of women retirees and almost two-thirds (64%) of preretirees would downsize their home; and
- Half (49%) of women retirees and nearly three-quarters (70%) of preretirees are willing to develop and follow a financial plan and budget.
It is evident in our research that women are making proactive course corrections in the areas of health, family and purpose. They are willing, but not taking action when it comes to financial course corrections. There is clearly an opportunity to educate women about their options and give them the confidence to make choices that improve their retirement readiness and overall well-being. It is very important for women to develop a holistic financial plan that takes into account their personal situations, values and goals. Enlisting the help of a professional financial adviser can be life-changing when it comes to taking control of your financial situation and developing a plan to address life’s challenges.
Thriving in retirement requires active, careful, consistent planning and adjustments before and during retirement. Even small, gradual improvements can build into big benefits.
Lena Haas is head of wealth management advice and solutions at Edward Jones.
This post was originally published on Market Watch
