Retirement is a new and different life stage that both men and women are faced with. How they choose to enter it can have a huge impact, both financially and emotionally, on their future. With dramatically different spending habits, lifestyle choices, and work-life preferences, it’s no surprise that men and women often have vastly different approaches to retirement planning.
This article explores why men and women retire differently, from their savings strategies and investment approaches to the types of retirement plans offered to them and how their spending habits impact their retirement.
Saving for Retirement – Men vs Women
People’s saving strategies for retirement vary greatly between men and women. While men and women both save for retirement, men typically save at a higher rate than women. According to a study conducted by Fidelity Investments, men are more likely to have a retirement account, save a greater portion of their paychecks, and invest in higher-yield products. Men also tend to invest more aggressively, putting more money in stocks and less in things like fixed-income investments.
Women, however, are more likely to focus on building an emergency fund, sidestepping investments altogether in favor of stashing cash away in savings accounts and CDs. Furthermore, a 2018 Merrill Lynch Life Leagues report found that while overall over two-thirds of men were found to be on track to meet or exceed their retirement goals, only 50 percent of women were on track. This could be due to the fact that women are more likely to take on a greater share of unpaid domestic labor than men, as well as having to fight for equal pay in some cases.
Types of Retirement Savings Plans
Whether you’re saving for retirement yourself or getting help from your employer, there are several types of retirement savings plans available.
For individuals, there are plans such as Traditional IRA, Roth IRA, and SEP IRA. Pensions are an employer-sponsored plan that pays a defined income upon retirement, but this type of retirement plan is becoming less offered as more employers shift to other models.
401(k)’s are a popular plan for employees, where you can contribute a percentage of each paycheck pre-tax and typically your employer will match a percentage of your contributions. 403(b)’s are similar 401(k)’s, but they’re offered in educational settings and 501(c)3s.
Tax Experiences
The difference in how men and women spend in retirement can be seen in their tax situations. Because men are more likely to have invested and saved more during their working years, their investment earnings from those accounts would be taxable income. Men have historically earned more than women, so the more money men make, the more tax they pay, especially if their income comes from investments.
Women, however, may be more likely to have saved less during their working years and therefore will probably report less taxable income because they don’t have as much investment income. In retirement, they may receive social security income that may be fully or partially taxable, depending on the tax bracket they’re in.
Retirement Health Care Benefits
Health care can be one of the most significant costs in retirement, and this is where men and women differ the most. On average, women outlive men and experience more chronic conditions, making health care costs a top concern in retirement.
For men, one of the greatest benefits of retirement health care is Medicare, which covers most hospital and medical costs incurred at age 65. Most employers offer retiree health care plans for their employees, and these may also cover some of an employee’s costs in retirement.
Women may have more difficulty finding health care coverage in retirement as most employer-sponsored plans only cover men. This can be especially difficult for single women, as Medicare does not cover long-term care costs for single women, leaving them to cover out of pocket costs for those needs.
Retirement Lifestyle
When it comes to retirement lifestyle, men and women differ in their preferences and spending habits. For most retirees, social activities and travel become a big part of life in retirement and this could involve different levels of spending.
While some men may be more likely to spend money on things like golf games and sports tickets, women may be more likely to seek community activities like walking groups, book clubs, or volunteer opportunities. Women are more likely to take an active role in volunteer activities in retirement which can involve travel, online learning, and international experiences, while men may be more interested in pursuits like sports, cars, and hobbies.
Women may also spend their money differently. They are more likely to be responsible for healthcare costs and may be more conservative in their spending choices. The same Merrill Lynch report found that women accounted for twice as much healthcare spending as men in retirement.
Financial Planning During Retirement
For both men and women, it is important to plan for retirement and understand any financial risks and contingencies that may arise. While most men and women have access to the same retirement benefits and plans, the financial decisions men and women make in retirement may differ widely.
Men may be more likely to make risky and aggressive investments during retirement, while women may be more likely to make conservative investments. Women may also be more likely to research their retirement plan options and get advice from financial advisors while men may be more likely to set goals on their own and make decisions without professional help.
Related Financial Decisions
In addition to retirement-related financial decisions, both women and men face additional financial challenges leading up to, and during, retirement.
Men and women may face different challenges when it comes to Social Security payments. Married women, in particular, may not be able to get their full Social Security payments if they outlive their husband.
Women may also be more likely to retire with fewer assets than men, due to the gender pay gap, meaning they have to make these assets last longer. Women, who are twice as likely as men to live in poverty during retirement, may be more likely to require financial assistance from family and friends in old age.
Retirement is an important life stage for all men and women, although their financial strategies and needs can differ quite dramatically. Men tend to save more during their working years, focus more on aggressive investment options, and have more access to employer-provided retirement benefits. Women, however, may take on more unpaid domestic labor, have to fight for equal pay in some cases, and may be more likely to require financial assistance in old age.
Regardless of gender, it is vital to consider the financial risks and contingencies that can arise in retirement and to plan out your retirement as early as possible. It is also important to remember that both men and women have access to most retirement benefits, including Social Security, 401(k)s, Roth IRAs, and SEP IRAs, with the end goal of creating a secure and comfortable retirement.