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What is the number-one reported factor for a happy and fulfilling retirement?
Good health.
Healthcare is the top financial concern for Americans and eight in 10 retirees list out-of-control healthcare costs as their most challenging problem. Although men and women share those concerns, recent data from the Social Security Administration shows that women have more cause to worry. In fact, one study showed that 65% of women were anxious about their finances compared to 54% of men.
The average annual Social Security income received by women aged 65 and older was just 78% of that received by men. This is due to lower earnings, which also means that women were able to save less through employer-sponsored retirement plans and their own retirement accounts.
In addition to not being able to save as much for retirement, one study found that 26% of women delayed or went without medical care due to cost. The same study also found that people with high financial anxiety were more likely to have past-due bills for the treatment of a health problem. The Peterson-KFF Health System Tracker also found that health spending during women’s reproductive years ages 19 to 44) is much higher compared to men in that age cohort. In 2019, average annual health spending for women aged 19-34 was $4,709, more than double men’s spending in the same age range, at $2,261.
Women not only face higher healthcare costs but also experience higher levels of stress and anxiety when it comes to finances in general and planning for retirement.
What can you, the financial advisor, do to improve the financial and physical wellness of your female clients? Let’s discuss it.
Prioritize retirement planning
Women, on average, live longer than men by 5.9 years. Men and women both face issues with saving enough to last their entire life, but since women tend to live longer there’s an added challenge for them since they earn less than men. As a financial advisor, one way you can ensure that your female clients have enough funds for retirement is to not use general estimates. Look at each client’s specific needs and goals; and if you don’t know their needs and goals, make that priority number one. Most people don’t think of a number they want to have in retirement, but they do know how they want to spend that money. Ask your clients what they plan to do in their retirement years, where they want to live, how often they’ll travel, whether they expect to be a caregiver for anyone in the future, etc. This will give you and your client a much clearer picture of how much she needs to save to live the way she wants in retirement without worry.
Talk to both partners
Research has found that financial advisors, regardless of gender, tend to focus nearly 60% of the time on the man in heterosexual couples. This is harmful to the advisor-client relationship and doesn’t improve women’s financial wellness. When you talk to clients who are couples, especially in heterosexual relationships, be intentional about addressing both partners. Don’t just ask, “What do you both think?” Go out of your way to ask the woman in the relationship her thoughts.
Include healthcare costs in the financial plan
As I stated earlier, women spend more on healthcare costs during a large portion of their life. And that’s just on themselves – those stats don’t even include the cost of caregiving, which also often falls on women. Outside of gender, healthcare costs account for 15% of one’s assets during retirement (an average of $315,000) and are the third-highest area of spending in retirement. Including healthcare costs into the financial plan can feel daunting, but a great way to ease into it is through Medicare planning and retirement planning. As your clients near the age of 65, you can talk to them about their Medicare coverage options and help them analyze what the optimal choice is for them based on their budget, goals, and health needs. If your client is retiring before 65, that’s another great opportunity to plan for healthcare costs.
Educate and empower women
Another way to support women’s financial wellness is to help them understand their financial plans. Rather than simply telling your client what you recommend, explain why you’re recommending certain strategies. This will not only improve the client-advisor relationship by creating a deeper sense of trust and understanding between you and your client, but it will improve the overall success of the financial plan. Encourage financial education by offering webinars and blogs to serve as learning resources for clients.
Final thoughts
By tailoring women’s financial plans to the specific challenges and opportunities they face, you’ll create a more accurate and comprehensive financial plan and improve the advisor-client relationship. Consider how you and your female clients can use their longevity to their advantage. Since women live longer, they have longer to let their investments grow. This is an especially important strategy to use since women spend more on healthcare and caregiving, and often earn less than men. To have enough saved for retirement and to reach their financial goals despite these hurdles, it’s important for women to invest early.
Aside from investments, creating truly personalized financial plans that incorporate healthcare costs creates a more accurate financial plan to set clients up for success. Additionally, if you’re intentional about how you communicate and collaborate with female clients, you will see an increase in retention. One report showed that 40% of women (versus 30% for men) are likely to follow their financial advisor to another firm.
If you embrace holistic and comprehensive financial planning, you have a fiduciary duty to take every part of your client’s life and well-being into consideration when creating their financial plan. And since women have unique challenges and opportunities to their wealth and health, that needs to be considered to protect their retirement assets and overall well-being.
Christine Simone is a co-founder of Caribou, a company that offers software to financial advisors to plan for and optimize healthcare costs.. She often writes on the topics of healthcare and women in tech.
Read more articles by Christine Simone