Women See the Reality of Retirement Years Spent Alone
Allstate Survey Also Shows Women Need to Adopt Tougher Attitude As They Approach Saving for Retirement to Avoid the Poverty Trap
Women clearly have gotten the message that they are likely to spend at least some of their retirement years alone because of divorce or the high probability of outliving their husbands. The U.S. Department of Labor has estimated that nearly 90 percent of women will end up managing their finances alone. Unfortunately, this realization has not translated into concrete steps-including frank financial discussions with their husbands or partners, according to the sixth annual Allstate "Retirement Reality Check" survey.
The 2006 survey, which measures Americans' attitudes toward and savings for retirement, showed that almost half of women (48 percent) have considered the financial implications of retiring alone, compared with 36 percent of men.
Not surprisingly, the Allstate survey showed that women are slightly more likely than men to say they are planning for retirement separately from their spouse or partner (37 percent of women versus 32 percent of men). The steps these women are most likely to take are making sure their spouse or partner has adequate life insurance (84 percent of women versus 75 percent of men) and a will (54 percent of women versus 52 percent of men).
Among women, 49 percent said they invest money separately from their spouse or partner, compared with 43 percent of men. And 42 percent of women said they maintain a separate savings account, compared with 28 percent of male respondents.
But the survey also highlighted two potential barriers between women and a financially comfortable retirement. First, almost half of the women respondents (45 percent, as well as 65 percent of men) said the husband or partner takes the lead in planning for retirement. Second, couples appear to believe that just "a simple conversation" keeps their plan on track; 48 percent of women and 58 percent of men said that's all that is needed to get their partner to take a specific action regarding saving for retirement. But, that confidence may conceal serious defects in planning for retirement.
Tough conversations needed
"The reality is that women must feel capable of handling planning for retirement on their own, because there is a strong likelihood they'll spend at least some of their retirement years alone," said Casey Sylla, president, Allstate Financial, a subsidiary of Allstate Corp. "Statistics show women are more at risk of ending their lives in poverty or a nursing home . And, only planning and follow-through can prevent that. The first step is a frank discussion with your spouse or partner about retirement goals, and how much you need to save to achieve those goals."
More than half of women (54 percent) said they know "a great deal" about what their husbands or partners want out of retirement. But only 39 percent of men-the ones supposedly taking the lead in planning-said they know "a great deal" about what their wives or partners want to achieve.
More sobering, few respondents said they feel "very prepared" financially for retirement, although men are a bit more optimistic than women (23 percent of men versus 19 percent of women).
"There is a huge disconnect in people's attitudes," said Barbara Stanny, author, " Prince Charming Isn't Coming" and speaker on women and financial issues. "On the one hand people say they expect a terrific, fun and exciting retirement, and on the other hand they say they haven't saved enough. Denial is the most dangerous habit we have to break. This isn't just about women being alone in retirement. It's denial about the need to start saving earlier."
Stanny reiterates that the stakes are higher for women, since they're likely to be alone at some point in retirement. She said women need to break planning for retirement and savings into manageable chunks rather than ignore the issue. "And you don't have to do it alone. Talk about it with your spouse, with other women, with financial professionals."
Mathew Greenwald, Ph.D., president of Mathew Greenwald and Associates Inc., the Washington , D.C. firm that conducted the survey for Allstate, said couples need to approach the planning for retirement conversation thoughtfully. "Talking about retirement dreams is the fun part, but talking about the financial steps to achieve those dreams can be difficult, especially if part of the conversation needs to address the likelihood that the wife will outlive the husband," he said. "Nobody wants to start a conversation by contemplating his own death!"
Greenwald suggests that couples identify broad and neutral topics to start a conversation about retirement. One starting point is an annual event, such as filing taxes, reviewing life insurance coverage or making decisions about employee benefits.
"Couples also need to understand and capitalize on the different perspectives their partners have," Greenwald said. "For example, women tend to be responsible for day-to-day expenses, and thus are focused on current finances, while men think longer-term. Perhaps a neutral conversation-starter is for the wife to lay out the costs of running the household for a month, and asking whether their retirement savings will be adequate to cover this amount-or whether these are the expenses they expect to have in retirement."
Because lifestyle is the driver of retirement expenses, Greenwald said any conversation ultimately needs to address how couples want to live. Those differences need to be addressed before it's possible to budget accurately, he said.
Another key element is to decide what tradeoffs are acceptable, Greenwald said. Couples may be willing to work longer to save more for a high-cost retirement, or they may be willing to scale back lifestyle plans so they can retire sooner. Another option is to plan to reduce lifestyle, and costs, some years into retirement to stretch savings further, continues Greenwald.
The fear factor
Part of planning is recognizing fears and identifying what can be done to eliminate or lessen the possibility of the worst coming true. For all survey respondents, the top fears concerned health care costs and the availability of care. Women were more likely than men to worry about not having enough money to afford the "little things" that make life worthwhile, or to end up being a burden on children.
"Regardless of their worries, everybody needs to think of retirement in financial terms," Stanny said. "And one gender isn't automatically more adept than the other when it comes to finance. In my experience, men were raised to be financially successful, and women were raised to be financially dependent. But no one taught either gender how to manage money. The good news is that it's not that difficult to learn, and it's never too late to start."
For more details regarding the Allstate " Retirement Reality Check " survey on Women and Retirement, download the Executive Summary (PDF).
Allstate created the sixth-annualAllstate "Retirement Reality Check" survey in conjunction with Mathew Greenwald & Associates. Using a random digit dialing methodology, Greenwald & Associates polled 1,603 people b or n between 1946 and 1978, with household incomes of $35,000 or m or e. Retirees were accepted with incomes of at least $20,000. The margin of err or (at the 95 percent confidence level) f or the total number of respondents in this study is ±2.5 percent, ±3.5 percent f or inf or mation specific to Gen Xers or Baby Boomers.
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