Lack of retirement preparedness among the female demographic has long been discussed, both here and within other respected online publications. Even so, there are continuous reports regarding either women’s lack of financial understanding, their assumption that they are indeed prepared for retirement or their lack of involvement when it comes to household financial decisions.
In fact, The American College of Financial Services’ “2017 RICP Retirement Income Literacy Gender Differences Report” found that only 18% of retirement-age women can pass a basic quiz on how to make a nest egg last in retirement. On the other hand, nearly twice as many retirement-age men are able to pass, and although those numbers are still grim, this underscores the trouble women face in their own retirement knowledge. Even more worrisome is that despite low retirement literacy, the majority of women (55%) are still extremely confident that they and their spouses would have enough money to retire comfortably.
Retirement Income Literacy: Women vs Men
In the study, women demonstrated lower literacy rates in 10 out of 12 knowledge categories. As illustrated in the chart above, there was a discrepancy in performance between men and women across the areas of annuity products in retirement (16% vs 24%), company retirement plans (30% vs 40%) and investment considerations in retirement planning (21% vs 49%).
However, women and men are equally knowledgeable on the topic of Medicare insurance planning and actually slightly more knowledgeable on the topic of paying for long-term care expenses (38% vs 35%), which is important as women, on average, have a longer life expectancy.
The report also shows that women, even with lower retirement literacy than men, are confident about their financial preparedness. The majority of women (55%) reported they were extremely confident they would have enough money to live comfortably throughout retirement. To break this down, only 24% of extremely confident women could pass the quiz while roughly 42% of the extremely confident men could pass the quiz. And in all 12 knowledge categories — including strategies for sustaining income, life expectancy, and life insurance — women reported lower self-perceived retirement income planning knowledge than men.
“Women face considerable challenges when it comes to preparing for retirement, and lacking financial literacy certainly does not help the cause,” said Jocelyn Wright, State Farm Chair in Women and Financial Services and assistant professor of women’s studies at The American College of Financial Services. “This is a problem, especially when a female at age 65 can expect to live another 20 years on average, two years longer than the average man. With this in mind, women cannot depend on their spouse to hold the keys to their retirement. It is time to get smart on how to navigate this complex and extremely important stage of life.”
As we reported in May, women are a whopping 80% more likely than men to be impoverished in retirement, according to a study by the National Institute on Retirement Security (NIRS).
The NIRS study reported that for women age 65 and older, data indicates that their typical income is 25% lower than that of men. As men and women age, men’s income advantage widens to 44% by age 80 and older. Consequently, women are 80% more likely than men to be financially disadvantaged at age 65 and older, while women age 75 to 79 are three times more likely to fall below the poverty level as compared to their male counterparts.
Financial advisors and agents can use such information to educate their clients about the lack of retirement preparedness, both in men and women alike. Armed with the statistics above, advisors have a strong case for why women may think they are prepared to enjoy their golden years but are, most likely, far from financially ready.
Emily Holbrook is a former Editor in Chief of National Underwriter Life & Health and Retirement Advisor magazine. She has covered the financial, risk management and insurance industries for more than a decade, with her work appearing in Risk Management, National Law Review and Huffington Post.
Emily graduated with dual degrees in Finance and English and worked in the financial industry as a fixed income trading administrator and analyst before becoming a full-time writer and editor. Emily now owns her own writing, editing and content strategy company, Red Label Writing. She can be reached at firstname.lastname@example.org or on LinkedIn.