Good news—four out of five older women report having a plan for retirement income.
Bad news—there is a “staggering gap” between women with an idea about retirement income options and the ones who have a formal, written retirement plan in place.
New research also reveals nine in 10 women with partners or spouses equally share or lead financial decision-making for their households, with female retirees and pre-retirees (ages 50-75) more open to financial advice than men.
These findings are part of the Retirement Income Literacy Survey from The American College of Financial Services, testing consumers’ knowledge about retirement income concepts and focusing on the drawdown phase when Americans have limited or no ability to earn additional money through work.
TAKE THE QUIZ HERE
“There are enough things to lose sleep over, but not having a financial plan should not be one of them,” Hilary Fiorella, Executive Director of the Center for Women in Financial Services at The American College of Financial Services, said in a statement. “Advisors need to understand that women may come to the table with different approaches to retirement planning, with many thinking about finances holistically and maybe more conservatively than men. Whether that conservatism is based on fear or misinformation is an ideal place to start a conversation with an advisor. While this research suggests lower retirement literacy levels than men, women also demonstrate an awareness of their knowledge level, admitting what they don’t know and prioritizing financial education and advice—the sign of an ideal client relationship.”
Closing the knowledge gap
Retirement literacy remains low overall, with 89% of women and 72% of men receiving a failing grade on a 38-question retirement literacy quiz.
The research suggests retirement income plans are less formal or not well understood for men and women alike, further underscored by consumers’ lack of confidence:
- Only one in four women feel knowledgeable about retirement income planning.
- Four in ten women feel less comfortable with investment risk because of the COVID-19 crisis.
- Only 16% of women feel very knowledgeable about investment considerations for retirement planning, though self-reported knowledge seems to increase with age and assets.
- Even fewer—14% of women—feel knowledgeable about strategies for sustaining income in retirement.
Yet women demonstrate they are ready and willing to build a meaningful retirement plan. Six in ten women believe good advice from a financial professional is very important to satisfactory portfolio performance, more so than men who feel the same way.
Guaranteed income is also a major concern: seventy percent of women emphasize the value of guaranteed income sources, a total that is even higher among eight in ten Black women and Hispanic women. Yet despite this perceived importance, women rate their own knowledge as low when it comes to the sources to build a guaranteed lifetime income:
- Only two in ten women feel highly knowledgeable about Social Security.
- Only one out of ten respondents feel educated about annuity products in retirement.
Long-term care fraught with concerns, misconceptions
Women outscored men on the understanding of who pays for long-term care, though only three in ten women correctly stated that most expenses are paid for by Medicaid, compared to just one in five men. Still, half of women express a high level of concern about the cost of healthcare in retirement, with one-third saying they worry about paying for long-term care expenses.
Only 12% of women feel highly knowledgeable about long-term care, and the research reveals a sizable gap exists between believing long-term care is likely and having a funding plan to support it:
- 50% of women expect to require long-term care in the future, yet fewer than three in 10 have a plan to fund a long-term care need.
- Only one in four women claim they own any type of insurance that would cover long-term care needs.
- Black and Hispanic women are less likely to believe they will develop a care need, even though national studies suggest Black and Hispanic women are especially likely to be caregivers, and caregiving can negatively impact their health.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
