When it comes to retirement, many women are losing confidence that they'll ever be able to afford it. Former managing director at JP Morgan Susan Hirshman, author of Does This Make My Assets Look Fat?, says in order to make retirement possible, women have to take a greater initiative and stop relying on anyone or anything beyond themselves.
"If you're unaware, you end up being part of the 'What if?' club, where you only wake up when something happens and you say, 'If only I knew," says Hirshman.
For women to regain control of their retirement savings, they need to stop relying on these five crutches:The Husband
The reality is: 50% of marriages end in divorce. Women also live longer than men. According to the Employee Benefit Research Institute (EBRI), half of the men reaching age 65 have an additional life expectancy of approximately 17 years; half of the women reaching age 65 have an additional life expectancy of approximately 21 years!
As a result, most women -- nine out of 10, in fact -- will be solely responsible for their finances at some point in their lives, and herein lies the problem. In fact, research from Syracuse University shows that almost four-in-10 divorced or separated women are age 65-plus and nearly one-in-three older widows are impoverished.
The Husband's Pension
According to Prudential, one-in-four women is relying on their husband or partner's pension. This is a risky strategy because if he dies first -- as is typically the case -- you'll probably only get 50% of the survivor benefits. That may easily put you in the poorhouse, if not in utter poverty.
What inheritance? Parents are not only living longer, but spending money that was originally earmarked for you on other things -- like long-term care. According to a national survey by MetLife, room rates for nursing home residents have risen more than twice the rate of inflation in the last year. Average private-room rates at nursing homes rose 4.6% to $229 a day or $83,585 a year; assisted living increased an average of 5.2% to $3,293 a month, or $39,516 a year.
Women are half as likely as men to receive pension benefits (and when we do, our benefits are minimal - about half of those given to men). Our savings is also insignificant. Given that, it's no surprise that 50% of women (vs. 33% of men) rely on Social Security. Women over 65 depend on Social Security for almost half their income, yet at its current level, the average Social Security benefit for retired female workers is just $1,164 a month. For widows, the average drops to $1,123 a month.
Friends and Family
While many women understand workplace retirement plans and IRAs, more sophisticated products, such as mutual funds, annuities, and long-term care insurance, remain a mystery, according to research by The Wharton School's Boettner Center for Pensions. But turning to your trusted friends and family members for financial advice -- as six out of 10 of us do, according to Prudential's Financial Experience & Behaviors Among Women Study -- is not the solution. Get professional advice from a financial planner (You can find one through the National Association of Financial Planners).
Intro to different retirement accounts
What does it mean to have a 401(k)? IRA?View Course »