Women Boomers Facing Financial Challenges in Retirement
The largest cohort of baby boomers, the “peak 65” generation, is reaching age 65 between now and 2030. However, women, who make up 52% of these boomers, are more likely to struggle financially in retirement compared to their male counterparts. This is according to a new study by the Alliance for Lifetime Income, a nonprofit focused on retirement education.
Key Findings:
Persistent Asset Disparities:
Economist Robert Shapiro highlighted a significant and persistent disparity between the retirement assets of men and women. The median retirement savings for women is $185,000, compared to $269,000 for men. This gap extends across various asset categories, including defined contribution plans, IRAs, other investments, savings accounts, and home equity.
Reliance on Personal Savings and Social Security:
With the decline of employer pensions, today’s retirees depend more on personal savings and Social Security. The median Social Security benefit for retired women boomers is about 33% less than that of men, with women receiving $21,400 compared to $28,400 for men. This shortfall contributes significantly to the financial struggles of women in retirement.
Broader Economic Disadvantages:
The study found that not only women but also Black, Hispanic, and non-college-educated individuals are at a higher risk of financial insecurity in retirement. Conversely, men, white individuals, and those with college degrees are better positioned, often having multiple retirement accounts and larger balances.
Income and Longevity Disparities:
Women earn approximately 80 cents for every dollar earned by men and live on average six years longer. This longevity necessitates more savings, yet women’s lower earned income and risk tolerance typically result in lower returns on their investments. Additionally, women often take on caregiving roles, sacrificing potential income.
Annuities and Supplemental Security Income (SSI):
While both men and women are equally likely to own annuities, the average initial payout for women is lower ($13,700) compared to men ($15,700). By 2030, an estimated 48,400 peak baby boomers will qualify for SSI, with 69% being women and 31% men, highlighting the greater financial need among women.
Recommendations for Improvement:
Address Root Causes: Caroline Feeney of Prudential Financial emphasizes the need to tackle the root causes of the financial disparity. This includes closing the gender pay gap, ensuring women earn equal pay, and addressing the financial impact of caregiving roles predominantly taken on by women.
Enhance Financial Education and Guidance: The financial industry needs to make expert guidance more accessible and appealing to women. Simplifying financial solutions and products, and encouraging women to ask questions without fear, can help them make better-informed decisions about their retirement planning.
Employer and Policy Interventions: Employers can play a significant role by providing better retirement benefits and financial education to their female employees. Additionally, policy changes aimed at improving financial security for women retirees, such as enhancing Social Security benefits and creating more supportive measures for caregivers, are essential.
Conclusion:
The financial challenges facing women baby boomers as they enter retirement are significant and multifaceted. Addressing these challenges requires a concerted effort from employers, policymakers, and the financial industry to ensure women can achieve a secure and comfortable retirement.
For a deeper understanding of the study’s findings and recommendations, you can read the full article by following this link.
https://www.cnbc.com/2024/04/18/women-who-reach-peak-65-may-be-at-risk-financially-research-finds.html