Women outlive men, but don’t plan for it

December 10, 2010

Half of American women will live past age 85, but almost none of them are planning for it. You can count on it, because the actuaries say so.

A new study from the Society of Actuaries (SOA) finds that 92 percent of female retirees, and 89 percent of pre-retirees, haven’t done the financial planning necessary to live comfortably for their full lifespan. Women outlive men by an average of four years (see chart), so they have a critical need to plan for inflation, health expenses and long-term care needs. The study notes that inflation averaged 3.5 percent from 1980 to 2009; medical inflation — which affects seniors disproportionately — averaged 5.8 percent over the same period.

“Inflation is a greater risk for those who live longer,” says Anna Rappaport, one of the actuaries who wrote the report for SOA. “Women also tend to need more resources for long-term care. Their greater longevity means they tend to be ill for longer periods, and they’re less likely to have a family member available to care for them.”

Women can expect to outlive men - Society of Actuaries

How can women diminish the risk of outliving their resources? Rappaport recommends that they focus on:

Social Security. “Four in ten elderly women will rely exclusively on Social Security. It’s everything for so many of them.”

Working longer. “Many think they can solve the problem by working longer, but four in ten will retire earlier than they planned due to a job loss, illness or the need to provide care to another family member. You can’t count on it.”

Pension cruise control. “We’re always talking about the need for financial education and better decision-making, but the actuarial conclusion I’ve drawn is that relying on people to make too many decisions and take too much initiative just leaves people out. Most of us don’t have the knowledge to act proactively. Automation features in retirement plans, such as default enrollment, will make a positive difference.”

Table courtesy of the Society of Actuaries, The Impact of Retirement Risk on Women.

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