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Women Face High Risk of Outliving Their Money
Mark Miller - Retire Smart
Here's some bad news for men: We don't live as long as women. But there's bad news for women, too: you might live too long -- financially speaking.
Women face a greater longevity risk -- the danger of outliving their assets and experiencing poverty in old age. The average life expectancy for a 65-year-old American woman is 20 years, or 85 years of age -- three years more than a man. And those figures are just averages, which means many women will live well beyond 85.
But longevity isn't the only factor at work here.
Our retirement benefits system is tied closely to the amounts we earn during our working lives--and here, men continue to be far ahead. The
non-profit
--Women work at paid jobs an average of 12 years less than men do over their lifetimes due to family care giving responsibilities.
Fewer work years translates to fewer years saving or participating in an employment-based retirement program. It also means lower
--Women earn 78 cents for every dollar earned by men.
--Less than one-third of retired women today receive pension income. And less than half of today's working women have access to a pension or retirement savings plan through their jobs.
As a result, nearly 40 percent of older women living alone depend on
Among single elderly women, the rate of poverty is 19 percent, according to
WISER's director, Cindy Hounsell, has been working for more than 10 years to draw attention to the general problem of retirement security for women. Recently, she has been trying to turn up the volume on one particular question: how to get more guaranteed income for women in retirement.
"The discussion usually focuses on the accumulation of retirement assets," she says.
"Retirement experts tell us to save enough to pay our costs over our life expectancy -- but we don't need life expectancy income. We need lifetime income."
Translation:
In the wake of the market crash, it's clear that voluntary investing in defined contribution vehicles such as 401(k)s and IRAs isn't going
to cut it. Along with
WISER recently released a study -- billed as a "blueprint for change" -- that surveyed more than 30 experts from government, the financial services industry, and professional and academic organizations on ways to address the problem. It's a valuable effort to shift the focus away from defined contribution programs -- such as 401(k)s and IRAs -- and toward income generation.
The solutions pointed to by the study are useful -- and not just for women. The report describes the need to move toward a greater use of products like income annuities, long-term care insurance policies and even reverse mortgages.
None of these products have caught fire when compared with the broader defined contribution and defined benefit pension markets. Privately purchased income annuities, for example, represent only about 2 percent of total household income received by current retirees. Reverse mortgages have been gaining ground in the wake of the housing crash, but have been hampered by high fees and problems with predatory lenders. Long-term care insurance policies also haven't sold very well, due to their price, complexity and lack of flexibility.
Investing - Women Face High Risk of Outliving Their Money
© TRIBUNE MEDIA SERVICES, INC.
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