A new study and white paper from Massachusetts Mutual Life Insurance Company suggest women express greater openness to financial education and getting professional financial advice compared with men.
According to the white paper, “Closing the Retirement Gender Gap,” which compiles findings from the firm’s Women’s Retirement Risk Study, financial advisers are in a strong position to help women avoid the prospect of poverty in old age.
“The difficulty that many women face in preparing for retirement leads many to anticipate living less comfortably in retirement and running out of money five years too soon, a stunning development from a retirement planning perspective,” warns Teresa Hassara, head of MassMutual’s Workplace Solutions.
According to MassMutual, on average, women retirees and pre-retirees expect to spend 25 years in retirement, compared to men who expect to live 23 years in retirement. However, women expect their income will only last 20 years, compared to men who anticipate their income will last 25 years. On average, the data shows, retired women anticipate living 30 years in retirement, while pre-retiree women expect to live only 21 years.
The MassMutual study points to several reasons why women anticipate a more difficult time financially than men when it comes to retirement. Those include being less confident about managing savings and investments, being uncertain about optimizing Social Security, feeling a need to replace a higher percentage of their pre-retirement income, and carrying more concern about taking investment risk.
As Hassara points out, there are many barriers that make it more challenging for women to prepare to retire. She calls this “a reality that we need to overcome if women are to enjoy a secure retirement.”
“MassMutual’s study shows that many women are less comfortable with financial issues and money in general,” she adds, “so it’s critical for them to have access to more education, professional financial advice, planning tools and other resources to meet these challenges head on.”
The research shows only about a third of both men and women say they will need to replace at least 75% of their pre-retirement income when they retire—despite the fact that financial advisers generally push for income replacement rates between 70% and 80%. Notably, 41% of men and 45% of women say they will only need 50% or less in retirement income replacement.
“MassMutual’s benchmark for retirement preparedness is the ability for retirees to replace 75% of their pre-retirement income from all sources, including retirement savings, Social Security and a pension, if available,” Hassara notes.
Continuing the pattern of showing less confidence than men financially, MassMutual finds women tend to be more concerned about market volatility and mismanaging their investments. Across the sexes, pre-retirees are more likely to worry about these factors than retirees. Nearly all women surveyed say they “want their investments to grow during retirement,” but even so, women are less comfortable with investment risk and tend to believe they should become considerably more conservative in retirement than their male counterparts, according to the study.
“Women who work with a financial adviser are more likely to say their adviser recommended that they invest more aggressively,” the study states. “Meanwhile, women may be better investors than they think, given their propensity to save, stick with investments longer, willingness to ask for professional guidance, and open to professionally managed asset allocation strategies for retirement saving such as target date funds.”
“Retirement plan providers and financial advisors need to connect with women and provide more education to help them become more comfortable with longer-term investment concepts such as taking smart risks, meeting income needs and how to balance growth and preservation,” Hassara concludes. “MassMutual is making a special point of reaching out to both advisers and women at the worksite to provide the tools and resources they need to be successful.”