Financial Advice: Women vs. Men

Women seem to express greater openness to financial education and getting professional financial advice than men do according to a recent study/white paper from Massachusetts Mutual Life Insurance Company. The study reports that 79% of retired women are receiving professional financial advice, versus 68% of men

The white paper, “Closing the Retirement Gender Gap,” compiles findings from the firm’s Women’s Retirement Risk Study. It reports that financial advisers hold a strong position to help women avoid the possibility of old age poverty.

“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. She points out there are many barriers that make it more challenging for women to prepare to retire and calls this “a reality that we need to overcome if women are to enjoy a secure retirement.”

MassMutual data reports that on average, women expect to spend 25 years in retirement (retired women foresee living 30 years in retirement and expect their income will last 20 years, while pre – retiree women expect to live only 21 years). Men expect to live in retirement for 23 years and anticipate their income will last 25 years.

The study points to the following reasons why women anticipate a financially more difficult time than men when it comes to retirement:

  • Less confidence in managing savings and investments
  • Uncertainty about optimizing Social Security
  • Feeling a need to replace a higher percentage of their pre-retirement income
  • Higher rate of concern over taking investment risk

“MassMutual’s study shows that many women are less comfortable with financial issues and money in general,” Hassara 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 indicated that approximately 1/3 of both sexes think they will need to replace around 75% of their pre-retirement income when they retire, but 41% of men and 45% of women said they would need 50% or less in retirement income replacement. Financial advisers recommend income replacement rates between 70% and 80% and MassMutual’s benchmark is the ability for retirees to replace 75% of their pre-retirement income from all sources (retirement savings, Social Security, pension).

Nearly all women surveyed stated they “want their investments to grow during retirement,” however, women are less comfortable than men with investment risks. More than men, women
are inclined to think they should become extra-conservative in retirement and are more concerned about market volatility and mismanaging their investments. These issues affect preretirees more than retirees across both sexes.

The study states, “Women who work with a financial adviser are more likely to say their adviser recommended that they invest more aggressively… Meanwhile, women may be better investors than they think, given their propensity to save, stick with investments longer, [have a] willingness to ask for professional guidance, and [are] 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… 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.” Hassara concludes.

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