We have all heard the old adage: women make less than men. Although not always, it usually is  true for a variety of reasons–segregating into lower paying jobs, discrimination, and penalties for exiting and reentering the workforce. But this is just the beginning of the challenges women will face as they near retirement.

 

The Roots of the Problem

 

The median woman in 2012 made  $37, 791 while the median male made $49,398. This alone suggests that most women will have a smaller pool of assets heading into retirement. Retirement is becoming longer, now a 20-30 year proposition, so women have an especially difficult task of stretching a smaller pool of assets of a longer timeframe.

 

Furthermore, women are more likely than men to exit the workforce during their careers. Most women are likely to leave to care  for a child, and many become stay at home mothers. Leaving the workforce can come with some hefty penalties. Only 74% of professional women return to work, and of those who do, many will re-enter with part time or reduced hours from what they previously worked. Women also find their earnings are less than they would be if they stayed in the workforce. So how does this affect retirement? Beyond the obvious having a smaller pool of assets, this means that women go through periods without earning any income. This means they cannot contribute to 401(k)’s, or save for retirement in other ways, and therefore lose out on a lot of compound interest. Furthermore, lesser earnings will equate to lesser Social Security benefits in retirement.

 

Barriers in Retirement

 

All of this comes into play before a woman has even reached retirement. Once retired, more factors come into play.

 

First off, women have a higher life expectancy than men. In 2014, life expectancy for females was 81.2 years; for males, it was 76.4 years. Not only does this mean women must make their already smaller pool of assets last even longer, but it also means women need to be more prepared to deal with age related illness.

 

The median rate for a nursing home room in 2013 was$84,000 per year. Health care costs can be an enormous expense. Not to mention, the psychological costs an aging parent place on children can be lot. Many children are the primary caregivers to an aging parent, and this may cause them to take time off from their own jobs in addition to immense stress.

 

Secondly, women are more likely to live alone than men in retirement. About 85% of women over the age of 65 are widowed. For this, women need to be extra financially savvy, as they need to stretch out less assets over a longer time, without the help of a spouse.

 

Women, simply, have a much greater risk of outliving their money.

 

So What Can Women Do?

 

Women, first and foremost, need to take control of their financial futures. They need to be well educated and not be afraid to seek the help of a professional advisor. A well balanced portfolio, that aims to preserve their principal and generate income, can help mitigate some of the challenges women face.

 

Secondly, women need to be well prepared for the medical costs that they may face in old age. Health costs for a couple can be as much as $220,000 out of pocket. Women, and men, should consider having a long term care plan. Long term care can help save women and their families a great deal of stress and money.

 

Lastly, women should carefully consider when to take their Social Security benefits. Social Security is a massive component of retirement. There are more than 500 ways to take out Social Security, with a lot of moving factors coming into the mix. These differences are not a matter of a few thousand dollars, but can add up to $100,000-$300,000 over a lifetime. Women and men need to sit down with a professional and discuss how Social Security fits into their retirement plan.

 

Women face a stacked deck when entering retirement. But with a bit of financial knowledge, a strong income generating plan, and a good long term care strategy, women do not have to be financially doomed. When allocated properly, a woman’s money can outlive her, and she can enjoy her retirement, just as any person should.