It is well known that men and women often take different paths to the same goal. Retirement planning is no different. Here are some tips to understand how women approach retirement and finances differently than men.
Retirement readiness and the gender gap
Women must often overcome unique challenges to achieve a financially secure retirement. One is the difference in hours and years worked. Women are more likely to put their careers on hold in order to care for children, parents or relatives. Even while in the workforce, women are more likely to balance career burdens with family and household responsibility. The average U.S. woman spends 28 hours per week on unpaid work – 65 percent more than the hours contributed by men.
Financial professionals can bring added value by helping female clients navigate the “gender gap” and choose appropriate financial solutions.
Financial literacy is a relative concept
Generalizing about the sexes has its shortcomings because there are exceptions to all statistical averages. Women, like men, fall across a spectrum for income, savings and financial abilities. However, it’s prudent to exercise caution when evaluating the financial literacy of your clients.
For example, a research team offered a three-question survey to gauge proficiency with financial concepts.* Only 27 percent of women, as opposed to 55 percent of men, got all three questions correct. Even in research that controlled for factors such as age, wealth and marital status, the gender gap remained.
But this assessment tells only part of the story. For instance, women tend to be more self-aware of their own financial literacy. In the survey above, women were more likely than men to answer, “I don’t know,” rather than respond incorrectly. They’re also more accurate in rating their financial know-how on a 1-to-7 scale. In addition, studies show that women have better impulse control and are less likely to make reactionary decisions on financial matters.
Financial professionals may find that they start at a disadvantage when taking on a female client. More than three in four women are wary of the financial sector. A woman unfamiliar with finance may fear her financial professional is exploiting her knowledge gap, and sadly, she might be right. A study suggests some financial professionals may adjust how they provide guidance to more financially astute clients.
Nine in 10 women believe financial professionals want to sell more than educate. Address this misperception head-on by making sure women clients understand their options and participate fully in the planning process.
Information leads to love for annuities
When it comes to a stable, guaranteed financial product like an annuity, education on the topic sends genders in opposite directions. Research shows that women who undergo a retirement planning course increase their preference for annuities, whereas men who get the same education become less likely to favor them. Financial professionals should understand that increased education guides women not only to save more, but to do so in stable, high-guarantee financial products.
As you build your business with retiring women, keep in mind these themes: education and trust. Provide your women clients with slant-free information, disclose your reasons for favoring one product over another, and appreciate women’s preference for guaranteed or safe financial products.
*The survey asked the following three questions: (1) Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow? More than $102; Exactly $102; Less than $102; Do not know; Refuse to answer. (2) Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account? More than today; Exactly the same; Less than today; Do not know; Refuse to answer. (3) Please tell me whether this statement is true or false. “Buying a single company’s stock usually provides a safer return than a stock mutual fund.” True; False; Do not know; Refuse to answer