Why do women ‘torpedo’ their retirement plans?

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Retirement is often viewed as a period when people can finally get to all the things they didn’t have time for previously.

Recently, however, Americans are cutting back on expenses traditionally associated with retirement, like entertainment and travel, according to data from retirement planning product provider Global Atlantic Financial Group. Retirees are spending 29% less on entertainment, 24% less dining out or ordering takeout, 18% less on travel and 23% less on mortgage payments and 22% less on rent.

Over half of those surveyed (55%) admitted to feeling regret over the way they handled their retirement planning. This can be particularly true for women, according to the survey. Advisors back this up.

“People haven’t bothered to see that there really are distinct financial risks for women,” says advisor Bridget Grimes, the founder of San Diego-based WealthChoice, a firm focused on women. “That’s where the industry falls short.”

Of all the respondents surveyed, 62% of women had regrets compared to 47% of men. Consequently, more women than men adjusting their retirement lifestyle, making cuts to entertainment (51% vs. 42%) and travel (42% vs 34%).

“Retirement regret is probably the number one reason why planners should be planning around the distinct financial issues for women,” Grimes says, noting the industry tends to take a “one size fits all” approach to the planning needs of women. “The fact is that the average woman will work 12 less years than a man … there’s a slew of issues around [women’s] retirement.”

One cause of this regret in women is their tendencies to put the needs of others first, often to their own detriment, which Grimes has seen over the course of her nine-year career.

“Women don’t save as much as they should,” Grimes says. “One of the things I’ve noticed over and again with my clients are their choices to torpedo their retirement savings [in order to pay for] something else that’s pulling at them.”

Indeed, Grimes says she has seen many women clients underfund themselves in order to care for a child, elderly parent, pay for a child’s education or something else along those lines.

“I just don’t see men that say ‘Oh, yea, I’m not going to save for my retirement. I’m going to instead pay for my kid’s college,’ whereas I do see that with my women.”

Others agree.

“We have seen several cases of single women in their 60s who regret — once we take them through a financial plan — not having done a plan earlier and not having saved much,” says Rachel Nohlgren, of Mustard Seed Advisors of Raymond James, in St. Petersburg, Florida.

A common theme Nohlgren has seen over the course of her 10-year career is regret around later life care. She has seen her female clients come in and wonder who will be there to take care of them when they are in their 90s, assuming their spouses will be gone and not wanting to be a burden on children, if they have any.

All of these concerns and delays in planning can be challenging for advisors, but something can be done.

One consideration is taking the equity from a home and purchasing a long-term-care policy or holding on to a home and renting it out, Nohlgren notes. Using liquidity for LTC is an approach Nohlgren’s firm will recommend to clients.

“The client has to still be young enough to have access to affordable insurance,” she says. “The sweet spot for this is between 50 and 70 [years old].”

Assuming that a woman in that range has reached a point where she decides she wants to buy a policy, often times that same woman may have access to equity in the house rather than equity in stocks, Nohlgren says. If there is any equity tied up in stocks and bonds it’s likely for retirement accounts and it wouldn’t make sense to take taxable money from that to then turn around and pay for a LTC account.

As women tend to live longer than men, whether or not a client is married, it is likely the decision on what ultimately becomes of a home will rest on her shoulders.

“The house equity, given the run we’ve had in the housing market over the last 10 years, is a very common funding source,” Nohlgren says. “She might be thinking about downsizing anyway, and she comes out with a few hundred thousand dollars to do something with. And you can get now what are called asset-based, long-term-care policies, which means you can take that hundred thousand and put it into what’s effectively a life insurance policy with long-term-care riders or put it into an annuity with long-term-care riders.”

Of those surveyed only 42% of people with annuities said they had regrets, compared with the 58% without an annuity. Similarly, those with pensions are less likely to have regrets than those without pensions (43% vs. 65%).

“Financial planners have traditionally used the analogy of a three-legged stool to discuss retirement planning; the three legs symbolized Social Security, pensions and personal savings,” Paula Nelson, president of retirement at Global Atlantic said in a statement.
“However, as pensions gradually disappear, personal savings are often insufficient and uncertainty around Social Security grows, these three legs are increasingly seen as inadequate, leaving individuals and their advisors searching for other income sources.”

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Retirement planning Retirement education Long-term care High net worth Gender issues Insurance Tax planning Social Security