It is a stereotype that women generally spend more than men do – but for retirement spending, it is a real phenomenon. There may be many reasons for this, but two stand out.
- Longer Lives – Women live longer than men on average. According to the most recent report from the Organization for Economic Cooperation and Development (OECD) on life expectancy, the average US man’s life expectancy is 76 years; for women, life expectancy is 81 years. Thus on the average, women are more likely to be living by themselves (or in assisted living circumstances) with only one source of income, and will need more income to cover spending over the extended lifespan.
- More Frequent Care – Statistics from 2010 show that overall number of visits to health care facilities (individual medical offices, outpatient clinics, and emergency room visits) per one hundred people aged 65-74 were 741 for women and 680 for men. Perhaps this is part of the reason why women live longer!
Frequent medical care should mean better health, but it definitely means higher medical costs. 2012 out-of-pocket costs for healthcare were $4,125 for men and $5,246 for women on the average.
These factors mean that women need more retirement benefits than men because of the higher costs. Unfortunately, according to a May 2014 report by the Employee Benefit Research Institute, women are significantly behind men in the average amount in their retirement accounts. The report, which studied the contribution patterns and balances in retirement accounts in 2012, found that women had almost 40% less in their retirement accounts that men did – averaging $81,700 in their accounts to $139,467 for men.
A 40% gap cannot be explained by only one reason; there are several factors at work. Likely factors are:
- Lower Pay– According to the latest census, women still earn on average 77 cents on the dollar that men earn. Less income generally means less money contributed to retirement programs, since a higher percentage of funds are needed for day-to-day expenses.
- Shorter Working Time – Women who have taken time off of their careers to care for children have a lesser time to contribute to their retirement funds. While men are taking an increasing role in childcare, they are still the minority in taking career time off to do so.
- Combined Accounts – Since joint IRA’s are not allowed, some families may be pooling resources and making one large IRA in the spouse’s name, instead of setting up smaller individual accounts.
In summary, it is extremely important that women have access to more retirement assets because they are more likely to need them and use them. Women who have their own accounts need to take special efforts to make extra contributions or risk living a lesser lifestyle in retirement than they would prefer. For example, take advantage of catch-up contributions options in your IRA when you become eligible, and max out your contributions to any employee-matching benefit program.
Women who are dependent on survivor’s benefits or retirement programs in their spouse’s name must take special care to understand all the options should their spouses pass away – for example, there are multiple options for rolling over the IRAs of their deceased spouses, including a special option to roll them into their own IRAs.
Ladies, take the time to review the paperwork, beneficiary forms, and other rules so you will be covered in the worst case. It is unpleasant to talk about these things with your spouse, but it is not nearly as unpleasant as running out of cash in your retirement.
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