Why women need to be financially planning for a 100-year life

Preparing for longevity is important for all of us, but particularly women—who not only live longer than men, but also face unique financial hurdles throughout life.

Let's consider a few facts: On average, women live five years longer than men. In fact, 77 percent of people who are widowed are women. Furthermore, by age 85, women outnumber men two to one, and the majority of centenarians—a staggering 85 percent—are women.

Why are these facts important? Because while longevity needs to be a factor in everyone's retirement planning, it's especially critical for women, according to an eye-opening Merrill Lynch report titled Women & Financial Wellness.

The reality is that women are more likely than men to be alone and financially self-reliant in their later years. In addition, women may wind up spending some of their nest egg on a partner's health or end-of-life care costs, further straining finances if they're not adequately prepared. And speaking of not being adequately prepared.

While more than half of women (64 percent) say they'd like to live to 100, the unsettling counterpoint to that goal is that 60 percent of women fear they'll run out of money if they actually experience such longevity. But that's not the worst of it. Forty-two percent of women are afraid they will run out of cash by age 80. And they may well do so: The typical retirement costs about $738,000, says the Merrill Lynch report, yet (and here's the most startling point) just 9 percent of American women have $300,000 or more saved. Nine percent. That's a gigantic shortfall. On multiple levels.

This is why it's so very important to read the tips and insights below from two leading voices on women and money: Lorna Kapusta of Fidelity Investments, and Carey Shuffman, director and head of the Women's Strategic Client Segment for UBS Global Wealth Management USA. Both weigh in on the importance of planning thoughtfully for a 100-year life and what women can and should start doing (yesterday) right now.

Key issues women need to think about in terms of longevity

Last year, Fidelity kicked off a new effort called "Women Talk Money," a discussion series delving into, among other things, the unique hurdles women need to be aware of when it comes to preparing for our extended lifespan, which collectively necessitates a different approach to financial planning. These realities include:

  • Longer lives involve more expenses during retirement–especially higher healthcare costs. About 43 percent of women do not know how much they'll need to pay for healthcare during retirement, according to Fidelity. Here's a ballpark answer to that important question: A 65-year-old woman retiring in 2020 needs at least $155,000 to cover healthcare costs in retirement. (Important note, that estimate does not include the cost of long-term care.)
  • About 75 percent of caregivers are women–which often means decreased long-term earning potential and retirement savings. Women are called upon to play many roles in life, particularly as caregivers. First, we are caregivers for our children, and later for aging parents or perhaps for an ailing spouse. These types of career breaks can add up. For this reason, it's important to have a plan in place ahead of time to keep your savings on track.
  • Too much money kept in savings or cash, instead of investing. More than half of women are keeping $20,000 or more sitting in cash. This is money over and above their retirement and emergency savings. More than a third of women have $50,000 in cash in this type of savings account. Important PSA: This is not a great move. Particularly in today's low-interest-rate environment in which your savings is actually losing value and will not keep up with inflation. Better move: Invest that extra money. Doing so can be a powerful way to keep up with inflation. (More on that later.)

Some of the other challenges women face include circumstances that may require retiring early (thus making planning ahead critical) and not fully understanding the ins and outs of Social Security eligibility in order to maximize benefits.

The importance of having a financial plan

Creating a carefully thought-out financial plan is critical to adequately preparing for those issues we just outlined—and if done well, such a plan will help see women through the extra years they may experience in retirement, says Fidelity's Kapusta. "Having a financial road map is a big stress reducer," she points out.

But how does one get started creating a plan, and what does it encompass? Think of your plan as something of a life road map; it includes a lot of different things, explains Kapusta.

Generally, this effort begins by identifying and writing down your goals for three years down the road, 10 years down the road, and even 20 or more years down the road. Think about what you're trying to achieve for each of those timelines. Of course, the more detail you include, the better. But start by simply identifying each goal. For instance: "I want to retire in 30 years." Or "I want to establish a comfortable emergency savings within five years."

Writing goals down helps make them real. In fact, when you write things down, there's a 42 percent higher chance of attaining success with that goal, according to Fidelity.

Next up, you'll need to get a grasp of what you currently own, and what you owe, Kapusta says. This step involves writing down in one column on a piece of paper all of the things you own, whether it's a retirement account, a checking account, or a savings account. Put all of these things in the left column on your paper. In a second column on that same piece of paper, on the right side, write down the value of each of the things you own.

Now, list all of the things you owe money for, in the first column on the left. (Think student loans, credit card debt, and so on.) And in the right column, write down exactly how much you owe on each debt. Once completed, this exercise should help you see clearly where you stand financially.

Additional parts of the financial-planning road map effort Kapusta referred to include getting a true handle on your month-to-month budget—and once you've completed all the other steps, it's time to look at how you're invested to achieve your goals.

"Doing all of this gives you a foundation. If you take these steps to develop goals and a road map to organize your financial foundation and have all of that laid out for 10 years, 20 years, and beyond, then you can invest in yourself," explains Kapusta.

Shuffman, of UBS, offers a similar perspective, noting that comparing assets to liabilities offers a way to better understand one's net worth.
"Women should start taking stock of their financial situations and really dig in to understand where they stand across their income, spending, current assets, and debt," she explains. "Understanding one's income, in comparison to spending, will paint a clear picture of current cash flow—including any overspending or areas of opportunity to save or invest further."

Now, step up your investing

Now let's look at the critical next step: Investing. Whether you invest on your own, work with a professional advisor, or tap into a Robo advisor, investing (above and beyond your retirement plan) is essential to adequately prepare for that 100-year life.

"Any money not in your retirement accounts, and not in your emergency savings, you should look to invest so it can grow to its greatest potential," explains Kapusta, adding that there needs to be a shift in mindset among women, recognizing that your money should be actively making money. This is a reference, of course, to the fact that simply putting money into a savings account as women have a tendency to do is not necessarily the best approach. Yes, you need to have an emergency fund, but beyond that, you don't want to be leaving money on the table by missing out on earnings.

"Once you get your emergency savings to three to six months of expenses, then dial-up retirement [investments]," says Kapusta. "Don't let that money sit in the bank."

Fidelity research found that women don't often invest outside of their retirement plans. Yet when they do, their returns are better. For instance, if you had $25,000 in a traditional savings account, in five years that might amount to all of…$25,030. Yes, you will have earned approximately $30. On the other hand, if you invested that money conservatively, in an average market, you have the potential to turn that $25,000 into $29,089.

Still, if the idea of freewheeling investing sounds intimidating, let's clarify.

"Investing doesn't mean picking stocks," advises Kapusta. "Now more than ever, the reality of investing is that you can pursue a mix. You can choose stocks, bonds…you can have a mixed portfolio, not all high-swinging, high-potential stocks. And that's what we want women to understand."

There are various options for investing that will allow for developing an approach you're comfortable with. You can go online and do it yourself, or partner with an investment provider.

The bottom line is: Women need to take the time to learn more about the variety of investment options available.

"If women start engaging in their financial futures now—even if it's just small steps to get going and build a habit—they'll position themselves much more securely for the years ahead," says Shuffman. "Financial knowledge can be built over time and acts as a foundation to help women prepare for the unexpected, while also allowing them to chart their own financial futures and unlock the life and legacy they desire."

Before wrapping her insights on why investing beyond our retirement funds is so critical for women, Kapusta adds one last gem—that, honestly, women everywhere need to internalize:

We all work so very hard. Your money needs to work just as hard as you do.


This article was written by Mia Taylor from Real Simple and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

Systematic investing does not assure a profit or protect against a loss in declining markets. Because such a strategy involves periodic investments, you should consider your financial ability to continue purchases in periods of low price levels. This informational and educational discussion is not intended – and should not be relied upon – as investment or financial advice. Investing involves risk, including loss of principal invested, and you should carefully consider your own time horizon, goals, objectives and tolerance for risk before investing.
GE- 4952256.1 (09/2022) (Exp. 09/2024)