Unique Challenges Women Often Face in Retirement

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Women have unique challenges that they typically face in retirement, and although men have their own share of obstacles, women tend to juggle more than just worrying about themselves and their own livelihood. This phenomenon is mostly due to the fact that many women today are part of a sandwich generation in which they support themselves, their children, and oftentimes aging parents. This makes retirement a lot more challenging, especially when life throws in the mix, such as divorce or the death of a spouse.

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Hello and welcome back to the Retired-ish Podcast. I'm your host, Cameron Valadez, Certified financial planner, and today I want to go through a subject, or rather a phenomenon that is near and dear to my heart, mainly due to the fact that my own mother has had to face and overcome most of the very challenges I will be discussing in today's show. Not only that, but a large majority of the type of clients my firm works with in my day to day profession also face these unique challenges. Now, I want to start off by saying, although I am discussing some of the more common issues specific to women in retirement, women are not a singular group. Every woman is unique in their own right, and experiences you have will differ depending on what phase of life you're in and your surrounding circumstances, some of which may be different than some of what I discussed in this episode.

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My goal is to help reveal what to expect if you should face some of these unique challenges and what you can do about it. Although it is very unfortunate, the reality of the world we live in is one where many of you will end up what we call suddenly single, whether that be the aftermath of a divorce or separation, or the unfortunate passing of your spouse prematurely. All the while, the other aspects of your life will continue on, and depending on which phase of life that you're in, you're often tasked with taking care of others, which then takes more of your time, your mental capacity, your money, and can deviate you from your own desires in life. And it's not just those of you who will endure one of these life changing events. If, let's say, you're the breadwinner in the family, you'll be expected to keep that going while also being expected to devote your valuable time to everyone else.

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And as you likely already know, there's only so much that one can do. So. In summary, those closest to you rely on your enduring strength and your love. But it can cost you dearly. So other than the fact that women tend to devote extra time to others' livelihoods, the main reason women often face their own unique issues throughout retirement is because statistically they live longer, which is good, but it also introduces more stress on your finances, which is the first issue that I want to address. 

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The average life expectancy for women at birth is about five years longer than men at around age 81. However, the longer that you live, the more your life expectancy increases. For instance, according to the Social Security Administration, once women reach age 65, their life expectancy actually increases to age 86 - and 84 for men. Of course, these are averages, and anyone can be well below or well above. But to put that into context, 25% of people age 65 will live to age 90 and 10% will live past age 95.

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Combine this with the fact that medicine and healthcare is advancing so rapidly, there's a good chance these odds and averages get better as time goes on. The problem here is that this requires more longevity when it comes to how far your money and investments will go after you factor in things like spending, inflation and taxes. It also means increased health care costs for longer. This problem is then exacerbated by the likely events of things like gray divorce, which is divorce after age 50 and is actually more common now than ever, and things like your spouse passing away before you or passing away prematurely, both of which I will touch on a little bit later. Now, the solution to this phenomenon, that women typically live longer and need their money to last longer, isn't so easy to address due to the second major issue many women will face, which is earning less. And no, I don't mean earning less per hour or on an annual basis in any given career versus men, although that has been an issue historically, but thankfully seems to be getting better nowadays.

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But what I mean is earning less over a working lifetime due to leaving the workforce to take care of young children and even reducing hours worked, maybe later in life, to take care of elderly family members. This is what we call being stuck in the sandwich generation. And when there's less time available to earn an income to care for others means less income, more costs, less savings, which means less money and time for retirement savings to compound a smaller Social Security benefit or pension benefit, which means you need to invest more on your own and take additional risks. You get the point.

00:05:32
Remember that as a woman, you're likely to end up living longer. So when we combine these two issues, we end up with potentially less money that also needs to last longer, a tough duo that needs to be well understood and addressed sooner than later. Now, this leads me to the paramount importance of investing on your own and doing so consistently. Studies show that in general, when it comes to investing, men's confidence in their own investing knowledge is higher than it should be given what they actually know. No surprises there, and that women's confidence in their investing knowledge is actually lower than it should be. This can be both a good thing and a bad thing. 

00:06:13
For instance, because of this, women tend to be much more conservative investors, which works against them over long periods of time. Being too conservative may not allow you to keep up with taxes and inflation and the fact that you'll need to earn more on your own investments since you will statistically live longer and likely have lower income from things like Social Security, for example, which would be the bad part. The good part, however, is that because of the lack of overconfidence that women have compared to men, they tend to trade less and don't often chase investing fads that tend to lead to lower returns over time and typically more costs and taxation. So, in summary, women simply know better. Another reason why many women tend to be very conservative when it comes to investing is because in cases where there was maybe a divorce or a spouse predeceased them and that former spouse handled the investing, let's say, for the household, they may lack a degree of investing education and may feel somewhat lost on what to do next. So they invest too conservatively or not at all moving forward.

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However, I think it's safe to say that when women are more educated on investing and have a clear understanding of why they invest a certain way, given their unique needs, they are better off in the long run, and the key lies in the implementation of an investment plan that aligns with their unique goals and understanding the risks they will face. Now, speaking of risk, I want to take a moment to go on a bit of a tangent here when it comes to investing without any specific goals or financial plan in place. More specifically, I want to talk about what are called risk tolerance questionnaires. Now, risk tolerance questionnaires are those set of questions that a lot of online investing platforms or 401K plans and even some financial professionals provide to you before investing to guide you in determining the amount of risk you will want to take when you do invest.

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However, in my opinion, there's a huge problem with these. The issue is that if you were to go through one of these risk tolerance questionnaires on your own, you're likely to end up scoring very risk averse, which typically means far too conservative which, as we mentioned, can hurt you in the long run when it comes to trying to achieve your financial goals and leaving a lot of money on the table in retirement. The root of the problem is that you are essentially basing your investments on your perceived understanding of risk, when that may not align with the types of returns that you actually need. Without the help of a plan or a professional to help you decide the level of risk you need to take, this can be challenging. I would argue that going too conservative is a greater risk to your financial livelihood, because if you're too conservative again, that means that there is a higher likelihood that you will run out of money too early in retirement, which is a retiree's greatest fear. Therefore, there's no such thing as no risk. You just have to choose what risks to take and when to take them.

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In the end, your goals and financial plan help you figure out how to balance risk taking, not a simple risk tolerance questionnaire.  

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Okay, so as I mentioned earlier, another extremely common roadblock that many women face when it comes to their retirement and their overall finances is divorce. A divorce, especially later in life, known as gray divorce, has many implications, as you likely know. Historically, women's standard of living is affected far more post divorce than men.

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While there could be several reasons for this, the main reason is due to women often continuing to be a caregiver to others, such as children and aging parents, and sometimes even their ex's parents. Now, what can make matters worse is that there are typically many common mistakes made during the divorce process and negotiations that are often realized after the fact once it's too late. Unless, of course, there's some savvy planning done ahead of time. So I want to share with you some of those common mistakes that you'll want to watch out for.

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The first common mistake that you need to watch out for is not understanding your divorce settlement fully. How were those numbers reached? What are the impacts of inflation? Is that even addressed? Is the settlement actually equitable? Another one is not looking at the tax implications of certain assets that you may receive in the settlement versus maybe some of the assets that you give up, which again may cause the division not to be equitable.

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Things like cash or home equity are not treated the same way as things like pre-tax retirement accounts like 401(k)s and such. They have different tax ramifications, either now or down the road, and so you want to make sure you understand how that's going to work given your situation. Another one is not understanding how to divide liabilities or debts. This one can get really messy when it comes to your individual credit after your divorce, so you need to be careful there. Another one is not protecting child support or alimony payments by requiring the ex spouse to maintain or even apply for life insurance.

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In other words, if they were to pass away unexpectedly and prematurely, you can lose a lot of support payments for years to come, which obviously will affect your financial situation permanently. Remarrying too soon without considering the impacts it may have on your Social Security benefits based on your ex's record. We actually have a previous podcast episode that dives more into the details on this that I will give you a link to in the episode show notes.

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And lastly, another common mistake is insisting on maybe keeping the marital home post divorce for whatever reasons when it's actually not very affordable post divorce. Or maybe it is affordable, but will significantly diminish the ability for you to save for your own retirement goals. Any one of these examples can have major impacts on your finances in the long run, so it's important to have strong financial guidance during a divorce process and don't just rely on an attorney to do that for you. They deal typically with the legal process, not so much the finances.

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Some other outside help might be required. I can't tell you how many times I've seen settlements ready to be agreed upon and then the settlement is far from equitable financially and the settlement has to be then renegotiated, which then prolongs the process even more.

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The last issue I want to mention that women often will face throughout retirement is the fact that women tend to be the primary targets for elder abuse. In fact, around 67% of elder abuse is targeted towards women and sadly, around 33% of that abuse is by their own family. Now the reason for this is yet again because statistically, women live longer and are likely to outlive a spouse or remain single after a divorce later in life, which leaves them more vulnerable in their 80s and 90s.

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To help combat this and protect yourself, you should build a community around you of people you trust, which would also include family. Having a close community of people can help make sure other people you trust will look out for you and raise suspicion if they think anything is out of the ordinary. In addition, you can have a trusted family member or other individual acting as a fiduciary Be your power of attorney for various parts of your finances or maybe a cosigner on your bank accounts. This way you have another party you trust that can review your finances and make sure you aren't getting taken advantage of. This also includes having maybe other professionals in your life also act as fiduciaries for things like your investments, such as a financial planner or attorney.

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These types of professionals often have the training and wherewithal to plan ahead to mitigate potential abuse and or spot it quickly as it's happening. So you're probably wondering, what can you begin to do about all of these unique obstacles that you're likely to face? Well, the most important thing is to realize that you will face some of these challenges at some point, and you'll need to be aware of them when they're happening. By letting life take over and continue with the status quo, you're bound to make costly mistakes that could change the course of your life. Of course, there's no way to know how or when some of these things will play out, so the best thing to do is prepare to mitigate as many issues as possible and to educate yourself on the aspects of finance and retirement that you may not know very well or are uncomfortable with.

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I want to give you some ideas and things that you can begin doing. One thing I encourage you to do is to self educate on some of the topics I've discussed today. And lucky you, this very podcast and the Retired-ish newsletter are both great ways to get education on these various topics. So you're already doing some of that, but there's plenty more out there.  

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The second thing is have a very thorough understanding of your finances. Know your cash flow, all the money in and the money going out of your household. Estimate expenses that will come up maybe later in life in retirement that don't exist right now, or vice versa. Know how much debt you will have and have a plan to pay it down. This can all be done by creating a financial inventory, or what we call a balance sheet for your household. The third thing would be to know where all of your investments are located and most importantly, how you are invested and why you are invested that way.

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I cannot stress this enough. If you don't know or have a thorough understanding of how and why you're invested and don't have specific goals for certain buckets of money that you have, it may be prudent to reach out to someone to help you. You'll also want to work with that person to show you how the issues I've mentioned so far may impact you, should they happen, and whether or not you'll be able to weather them, or if it will blow up your financial life entirely. The fourth thing would be to understand what insurances you have or don't have, and the amounts. I can't tell you how often I see insurance coverage that either isn't needed or is completely inadequate. Start looking into this, since proper insurance coverage is one way to reduce the biggest financial risks in your life.

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And lastly, know where all of your important documents are. In the unfortunate situations such as a divorce or if a spouse predeceases you, you'll want everything to be readily accessible and understood. Otherwise, you'll add to the stress and the grief you'll be experiencing. These could be things like legal documents, pay stubs, tax returns, bank and investment statements, deeds, passwords to computers, codes to safes, et cetera.

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Now that does it for today's show. Hopefully this episode helps you become more prepared to face some of these potential issues that you might face in retirement. If you have trouble understanding how to invest given your circumstances or you feel that you need some sort of plan to keep you on track for your goals, feel free to reach out to us at Retiredishpodcast.com or email us at info@retiredishpodcast.com. You can also ask me a question personally. I will do my best to answer it anonymously on a future episode. If you can spare a minute and you find this information actionable and insightful, please subscribe to or follow the show right there on your podcast app. If you'd like to learn more about the topics discussed in today's show, you can find links to the resources we have provided in the show notes right there on the bottom of the page on your podcast app, or you can find it by visiting us at retiredishpodcast.com/32. 

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Be sure to sign up for our monthly Retired·ish newsletter, where each month we discuss many of the topics we covered on today's podcast and more relevant and up to date information surrounding the entire retirement landscape. Again, this can all be found at Retiredishpodcast.com/32. Thanks again for tuning in and following along.

See you next time on Retired-ish.

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