While half of women at age 65 will likely live beyond age 85, 92 percent of female retirees and 89 percent of female pre-retirees do not plan far enough in the future to cover this 20-year period. A new report from the Society of Actuaries (SOA) highlights these gaps in planning and offers an actuarial perspective on techniques for addressing these retirement concerns. The report, The Impact of Retirement Risk on Women, identifies findings from the 2009 Risks and Process of Retirement Survey Report, and focuses on issues in the survey specifically as they relate to retirement concerns for women.
Given the fact that women outlive men on average by three or four years, women need to better plan for various risks, such as inflation, outliving assets and the need to cover long-term care costs. Despite similar perceptions of retirement risks between men and women, actuaries caution that the affects of risks on women can be quite different, and therefore an understanding of post-retirement risks women face is particularly important. For example, the expected average value of the cost of lifetime long-term care services is $29,000 for males and $82,000 for females, in 2000 dollars, which highlights the need for women to better prepare for the risk of incurring long-term care costs in retirement.
"Many women approaching retirement are not focused on the long-term, and the economic crisis of the past few years is only going to add further challenges in retirement security for women in the Baby Boom generation," said Anna Rappaport, FSA, MAAA and co-author of the report. "Our study on the impact of retirement risks for women is meant to be a call to action for women to educate themselves on retirement-related risks, better prepare for the long-term and, hopefully, avoid financial shortfalls."
The SOA report reveals many gaps in understanding of retirement risks. In particular, the report highlights five key risks affecting women in retirement, including:
Outliving Assets
Among men and women, there is often little focus on the variability of life expectancy and the financial planning horizon is relatively short when compared with life expectancy. While men and women have similar planning horizons, women have significantly longer life expectancies. Coupled with the fact that women traditionally have tended to marry men older than themselves, these facts emphasize the critical need for much more sophisticated financial literacy and retirement planning among women.
Four out of 10 women over 65 living alone depend on Social Security for virtually all of their income.
Loss of Spouse
Because women have longer life expectancies than men and traditionally are younger than their husbands, periods of widowhood of 15 years or more are not uncommon. For many women, the death of a spouse is accompanied by a decline in standard of living.
Eighty-five percent of women over age 85 are widows, compared to 45 percent of men.
Decline in Functional Status
Women are likely to have a longer period of chronic disability and are more likely to need care in a long-term facility or from a paid caregiver. This is compounded by the fact that women are more likely to be alone in old age and less likely to have a family caregiver.
Forty-six percent of retired women are more likely to expect to pay for assistance than retired men (34 percent), during the less active, somewhat limited stage of retirement. Additionally, 70 percent of retired women are more likely to rely on family or community services for help than retired men, during the least active stage of retirement.
More than two-thirds of women pre-retirees are likely to rely on family or community services (69 percent) than male pre-retirees (48 percent), in the less active stage of retirement.
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