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Retiring Women: A Real Anxiety The sad fact is that, for many women, retirement won't be rosy. Here's what you can do to help.

August 1, 2004

Recently, several women clients in their late 50s and early 60s have come to me expressing a high degree of anxiety. They would like to retire, but when we sit down and look at their finances, we often find they cannot afford to retire for many years. They will be working until they are in their early 70s. Even then, they will need to reduce their standard of living.

These women's anxieties are based in reality: They do not have enough to take care of themselves in their later years. The facts make the case.

* Women earn less and save less for retirement than men. As recently as 2002, women's earnings were only 78 percent of men's. Although the earnings gap is narrowing, women simply have less extra money in their cash flow to save for retirement. A 1996 survey of women found that more than 58 percent of female baby boomers had less than $10,000 saved in some form of retirement savings. A survey commissioned by Scudder Kemper Investments found that women accumulate about half what men do in their retirement plans.

* Women work less than men. Because of family responsibilities, women are out of the work force more often than men. The Department of Labor notes that more women (76 percent) than men (45 percent) take advantage of the Family Medical Leave Act. As a result, they have less time to accumulate money for retirement.

* Women are less likely to receive a pension. Whereas 33 percent of older men receive funds from private pensions, only 13 percent of older women do. For current workers, 49 percent of men versus 22 percent of women are covered by pensions. And women who are collecting pensions receive about half of what men do.

* Women tend to plan less. A 1997 study sponsored by Dreyfus and the National Center for Women and Retirement Research found that women face more barriers to retirement planning than men. Women's retirement planning is hindered because of lack of money (53 percent), lack of knowledge about investing (48 percent), and lack of time (45 percent). Nearly 70 percent of women say they have no idea how much money they will need for retirement. When women do invest, they are often more conservative taking less risk and, therefore, realizing a lower rate of return than male investors.

* Women have greater need. Because women live longer than men (an average seven years) and are generally healthier, their financial needs in retirement typically are greater than those of men. What's more, elderly women are three times more likely to be widowed than men. Divorcees often are even worse off than widows or single women, because they may be saddled with an expensive home that they received in lieu of a portion of their ex-husband's pension or other retirement savings.

What do all these statistics have to do with your clients? Hopefully, the information can make us more sensitive and more effective financial advisors. Our job is to validate the reality of many women investors and help them learn strategies for getting by financially.

We need to support them in looking closely at their expenses and, if necessary, in making difficult life-style choices. Clients who are anxious about running out of money often have a lower risk tolerance. We may need to spend time educating our less wealthy retirees about the need to invest for the long term. As our clients struggle to get past their fears, we may find ourselves repeatedly explaining investment strategies and teaching the importance of diversification. Most of all, we need to be available to these clients. Our patience and our support create a safety net for our older women clients.

Sharon Rich, Ed.D, is president of WOMONEY (Sharon.rich@womoney.com), a fee-only financial planning firm in the Boston area that focuses on the needs of women and their families..

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Sharon Rich