Women Have Unique Retirement Planning Needs

By Andrew Brake

Translating retirement dreams into reality can be challenging-especially for women, who often must overcome unique, gender-specific hurdles to achieve financial security.

These challenges include lower average earnings, child custody and support, elder care and longer life expectancies than men. This series of articles explores these special gender-based issues to help women become better informed about retirement and financial planning.

As more women have entered the workforce and their pay moves toward parity with men, women now have more opportunities to save and invest for retirement. But simply increasing women's financial power will not necessarily result in a higher quality of personal retirement planning, greater participation in retirement plans, a higher rate of savings or smarter investing.

The facts tell the story:

Women live longer-Statistically, women outlive men by an average of about five years. This suggests they will have to save more because they'll have more years of retirement to fund.
Women save less-The women's median contribution rate is 6% vs. 8% for men, according to the Ninth Annual Transamerica Small Business Retirement Survey (September 2008), although the savings rate for both men and women falls short of the minimum recommended 10%. Only 10% of the women surveyed reported household retirement savings totaling over $100,000, compared to 29% of men.
Women start saving later-Women postpone retirement saving later in life than men, so they have fewer years to accumulate a retirement nest egg.
Women have less to invest-Generally, women have less to invest since, on average, they earn less than men.

The poverty rate for all elderly women is 13% according to the U.S. Census Bureau in 2008. However, the University of Michigan Retirement Research Center (May 2003) found that for widows, divorced and never-married women, the rate jumps to over 18%. Too many rely on Social Security as their sole source of income.

Next, you'll learn more about the pay differential between men and women-one of the major financial challenges facing women as they plan for the future.

Women save less because they earn less

Despite significant achievements in the workplace, many women are still at a disadvantage when it comes to earning power. No matter what measure is used, women's earnings generally remain below those received by men.

According to the U.S. Census Bureau, the median earnings of full-time male workers was $43,460 in 2007. By the same measure, the median income for women was $33,437. But the gap between women's and men's earnings closed slightly. In 2007, the female-to-male earnings ratio was 0.78-higher than the previous all-time-high of 0.76, first recorded in 2001.

Various factors contribute to these earnings differences:

• Women's careers are interrupted more often for childbirth, childcare or elderly parent care.
• Even women who gain entry into high-paying jobs can be subject to these demands on time and attention.
• Smaller companies with smaller payrolls typically employ more women than men.
• Fewer women than men are union members.
• More women than men choose not to work outside the home.

For these reasons, it can be especially important for women to become informed about retirement and financial planning programs-and to participate in employer-sponsored retirement plans.

Next, we will discuss the competitive demands that many working women face-and often face alone: the care of children and elderly parents.

The challenges of providing child and elder care

Women's traditional role as caregivers for both children and elderly family members often impose special financial hardships and make it even more difficult to set aside money for the future.

This is especially true for women who are custodial parents, dependent on child support payments that might or might not be forthcoming. According to the 2005 edition of Child Support for Custodial Mothers and Fathers, a U.S. Census Bureau report, an estimated 13.6 million parents had custody of children under 21 years of age. And five of every six custodial parents were women.

Custodial mothers are more likely than fathers to work part time and have the greatest need for child support. Yet, the Census Bureau study found that among the more than 11 million custodial mothers, only 2.9 million were receiving the full amount of their court-ordered child support payments. Clearly, the unsupplemented burden of child and household support falls more often to women with single incomes-a fact that can have a devastating effect on retirement-planning efforts.

Caring for the elderly

Nearly one in four of the nation's households is involved in caregiving to family members or friends aged 50 or older. And about 75% of those caregivers are women. (Source: 101 Facts on the Status of Workingwomen, published in 2005 by the Business and Professional Women's Foundation). The BPWF report also stated that 27% of all caregivers are daughters of those receiving the care, and that female caregivers spend 50% more time providing care than male caregivers.

Further, according to the BPWF, employed caregivers are more likely to miss work, lose a job or career opportunity or experience other negative economic effects.

And then there is the direct financial impact. Elderly people living on a fixed income can have more difficulty paying utility bills, medical deductibles, nursing home bills or home healthcare charges. When the elderly parent runs a little short, the caregiver might be required to make up the shortfall. Again, this can reduce the amount available to save for retirement.

What women can do to prepare for the future

Financial planning begins with becoming educated about key financial issues. That's not as difficult as it might sound, because it just takes some time to read up on finances in dozens of personal financial management books and magazines on the market.

These publications explain the pros and cons of investments such as mutual funds, variable annuities, certificates of deposit (CDs), money market funds and other investments; savings programs such as workplace retirement plans and Individual Retirement Accounts (IRAs); and the concept of risk management through life and long-term care insurance.

Next, acquire an understanding of cash management. This involves monitoring your checkbook, determining where your money goes every month, and finding ways to reduce these outflows if they exceed your income. Budgeting is the most basic, most effective way to sort out balance income and outgo, identify expenses that need to be reduced and provide a framework for managing your finances.

Now is the time to start using the five-step retirement-planning process:

• Set goals
• Analyze current financial position
• Develop strategies
• Choose specific investment options
• Evaluate and follow up on your plan

This process can help you determine how much money you'll need at retirement and make decisions about how to start accumulating that money. For more information about financial and retirement planning for women, contact financial advisor, Andrew Brake @ 336-833-3066 or
Securities and investment advisory services are offered by VALIC Financial Advisors, Inc., member FINRA and an SEC-registered investment advisor.

VALIC represents The Variable Annuity Life Insurance Company and its subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement Services Company.

Copyright © The Variable Annuity Life Insurance Company.

All rights reserved.

Andrew R. Brake, MBA, CRPS® - Financial Advisor
Atlantic Region - Western Carolina District
VALIC Financial Advisors, Inc.

7029 Albert Pick Road, Suite 206, Greensboro, NC 27409
Office: 336-833-3066 Voicemail: 800-892-5558 ext. 88037

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