(The writer is a Reuters columnist. The opinions expressed are his own. For more from Mark Miller, see link.reuters.com/qyk97s)
By Mark Miller
CHICAGO It is time to stop blaming the victim when it comes to women and retirement planning.
An endless stream of studies and surveys all show women are less prepared for retirement than men. The typical story line: "Women aren't interested in managing money, and they're not good at it. They're more interested in other things - family, friends, children."
The real problem can be found elsewhere - in the sobering data about the economic gender gap. A new study on women and retirement, released today by the Transamerica Center for Retirement Studies, finds that nearly half of women lack a retirement strategy, are not confident about their ability to retire comfortably, and do not plan to retire. Ever.
The study says that many women are struggling just to get by: A majority (55 percent) are focused on paying off consumer debt and covering basic living expenses. Just 20 percent say that saving for retirement is their highest financial priority, although the number is a bit higher among older working women (29 percent). By contrast, men are more likely to cite retirement saving as their top priority (26 percent) and less likely to cite paying off debt as their number one concern (23 percent).
The study also notes that the women's annual incomes continue to lag those of men. According to the U.S. Census Bureau, women earned 77 cents in 2010 for every dollar earned by men. This means lower lifetime earnings and savings, and lower Social Security benefits. Explanations still include gender discrimination, but also the career pauses women are more likely to make to care for children and aging parents.
Women also live longer, so their need for retirement assets and income is greater. Life expectancy for women was 80.8 years in 2010, reports the Society of Actuaries, compared with 75.7 years for men.
The Transamerica study identifies two troubling knowledge gaps among women:
- Women see working as a retirement plan
A majority of women (53 percent) are relying on continued work as their retirement plan, yet research shows this is often merely an aspiration. The Employee Benefit Research Institute reports that half of all retirees leave the workforce earlier than they expected. The top reasons are health problems, disability and downsizings.
"Planning not to retire is not a retirement strategy," says Catherine Collinson, president of the Transamerica Center. "There are practical realities, and unforeseen circumstances, especially as we get older."
- Women undervalue Social Security
Transamerica found that a majority of women (56 percent) expect to self-fund their retirement through their 401(k) accounts. Only 30 percent think they will rely on Social Security as their primary source of income in retirement.
Just the opposite is true. For all women over age 65, fifty-nine percent rely on Social Security for half or more of family income, according to the National Academy of Social Insurance. Twenty-nine percent get almost all (90 percent or more) of their income from the program. The numbers are higher still for single retired women (widowed, divorced or never married).
What should women be doing to turn this problem around? Here are two suggestions:
1. Get a plan
Only 11 percent of the women surveyed said they have any kind of written strategy for retirement. "Economic circumstances can be difficult, especially in this job market, but that doesn't preclude developing a strategy," Collinson says.
A growing number of workplace plans are adding inexpensive one-on-one financial planning from third-party registered investment advisers, who offer unbiased advice and have fiduciary responsibilities to put the best interest of clients first. These folks can add value. If you can afford it, hire an RIA independently.
A more basic starting point is to calculate a retirement savings goal using any of the available online calculators. "It's a jaw-dropping experience when a woman sees how much she needs to save. It can put some things in perspective," says Collinson.
This is an especially valuable exercise for younger women, who still have plenty of time to benefit from the magic of compounding. Even small account contributions in your twenties or thirties can grow into significant balances by the time retirement rolls around.
2. Understand and maximize Social Security benefits
The payback in lifetime benefits can total hundreds of thousands of dollars, depending on your longevity. For individuals, the key decision is the timing of filing for benefits. Filing at the first age of eligibility (62) gets you just 75 percent of your full benefit. Waiting until the full retirement age (currently 66) gets you 100 percent. By waiting until age 70, you get 132 percent of your benefit. And for married couples, an array of other benefit-boosters are available based on spousal and survivor strategies.
Some financial planners are equipped to help with Social Security strategies. An array of third-party services have sprung up that can help maximize benefits for a small fee. One is SocialSecuritySolutions.com. For a small fee - and a minimum of upfront work on your part - the service generates a report offering up optimization strategies.
These steps are within reach, even for women facing steep, immediate economic challenges.
(Follow us @ReutersMoney or here. Editing by Beth Pinsker and Steve Orlofsky)