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Why Women Need To Save More Than Men

Men and women may not be on equal footing when it comes to investing for the future. On average, women work fewer years and earn less than men, but they also tend to live longer. Therefore, women must focus on the concerns that are unique to them when planning for retirement.

Studies show that the majority of married women actively participate or take the leading role in managing family finances. Moreover, women outnumber men in participation in investment clubs across America.

Obstacles Remain: Lower Pay Compounded By Fewer Working Years

Women earn only about 80 cents for every dollar earned by men.* Because they earn less, women often are unable to invest as much as men. In order to make up for other discrepancies in retirement benefits, women may actually need to invest more.

For example, because women often leave work to bring up children or care for elderly relatives, they have fewer total working years. On average, they spend seven years out of the workforce to care for family members.**

This often means that women qualify for much lower pension benefits. Fewer years in the workforce, fewer years with a single employer, and lower pay are all factors that may contribute to a lower average pension for female retirees. At the same time, women on average live longer than men, so they must provide for more years in retirement than their male counterparts.

Social Security Statistics Favor Men

Women also tend to receive lower Social Security benefits than men.** Social Security benefits are calculated based on a person’s highest 35 years of earnings. If a benefit recipient doesn’t have 35 years in the workforce, the Social Security Administration will add zero-earnings years to his or her record to equal 35 years. This will lower the average monthly earnings figure and may result in lower benefits for women who have not worked for a total of 35 years.**

Women Live Longer

Finally, because women generally tend to live longer than men, not only can they expect to spend more years in retirement, but they must consider that a couple’s retirement savings may be diminished by health care costs for the spouse who dies first. According to the National Center for Health Statistics, a 65-year-old woman will likely live to age 85, compared with age 82 for a 65-year-old man.***

*Sources: Bureau of Labor Statistics, September 2004; U.S. General Accounting Office, October 2003 (most current data available).

**Source: Social Security Administration, 2004.

***Source: National Center for Health Statistics, February 28, 2005 (based on final data for 2003).

Saving More Just To Catch Up

In recent years, the earnings of women have increased.^† This could mean that potentially more investments will be made by women.

Nonetheless, the bottom line is that in order to make up for differences in earnings and benefits, and more retirement years due to longer life spans, women have to invest more to fund their retirement.

†Source: Bureau of Labor Statistics, September 2004.

What Smart Women Need To Do

• Carefully consider how much risk you are willing to take in exchange for the potential to earn higher returns. Historically, equity investments have provided higher returns over the long term than less-risky investments like money markets and short-term bonds.^†† Keep in mind that stocks offer long-term growth potential but may fluctuate more and provide less current income than other investments.

• Obtain information about the retirement benefits that are available through your employer, and actively participate in any plans offered.

• Learn about the investment vehicles that can help you reach your retirement goals. Your financial professional is an excellent source of information and guidance to help you sort through the many choices available.

• Contact local professional/trade associations, women’s groups, community colleges, and adult education centers in your area for information on investment or personal finance seminars taking place.

• Recognize the unique challenges you may face and start saving and investing as early as possible to overcome them.

It’s always a good idea to consult your financial professional before you develop a savings and investment program.

††Source: Standard & Poor's, 2006. Past performance is no guarantee of future results. Stocks are represented by Standard & Poor’s Composite index of 500 Stocks, an unmanaged index of common stocks generally considered representative of the U.S. stock market. The performance of any index is not indicative of the performance of any particular investment. Individuals cannot invest directly in any index.

Points To Remember

1. Women are not inherently "bad" money managers. In fact, they often manage family finances.
2. Women generally have longer life expectancies, so they need to save more for a longer retirement.
3. Many women generally spend fewer years in the workforce and earn less than men. These factors contribute to lower pension and Social Security benefits.
4. Lower benefits mean that many women may need to invest more aggressively depending on their risk tolerance and financial objectives and start contributing to their retirement savings as early as possible.
5. Because women tend to outlive their husbands, women should examine the household financial plan carefully to help ensure that joint assets will be sufficient should their spouse incur significant medical expenses.

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