Female Baby Boomers and Retirement: A Status Update

Although the front end of the baby boom generation is well into retirement, we are still 10-15 years away from the final boomers to hit retirement age.  With this in mind, we wanted to take a look at this cohort and highlight the research specifically aimed at women.  You may be surprised by the uphill battles they’ve faced over the last few decades.

Limited Career Choices and Gender Bias in Retirement Policies

Although Baby Boomer women were far more likely to go to college and get a job than the previous generation, the concept of “acceptable” careers for women often pointed them toward work with lower compensation.  As a result of these lower paying careers, women had less money to defer into retirement accounts than their male counterparts—if they chose to defer funds at all.

Also, due to part-time work and lower wages these women are looking at significantly smaller Social Security payments in retirement.  This may leave many women either dependent upon a spouse or relying on Social Security and personal savings.  This, coupled with less time in the workforce due to pregnancy and child rearing, has left many female Baby Boomers at a great disadvantage.

Individual Responsibility and the Psychology of Saving

Another challenge facing female Baby Boomers is the fear of risk and the perception that money is something that should be left to men.  The latter mindset may have led some women to leave retirement planning and budgeting up to their spouses.  Couple this with a lack of individual responsibility on the parts of both men and women in this generation, and we are left with a big problem. 

According to several studies conducted in the mid-nineties (O’Neill, 1991; Twentieth Century Services, 1994). Hayes and Parker (1993), Kadlec (1994), and Pope (1994), the Baby Boomer generation was shaped by a more affluent lifestyle than their parents.  They enjoyed a higher median gross income and higher free spending limits.  Additionally, since Boomers are a generation detached from the Great Depression’s influence on the importance of saving, many have more reliance on Social Security for retirement and simply have not saved enough.

Risk Averse and Under Educated

Research dating back to 1994 and prior (NCWRR) found that women tend to be conservative, low-risk investors.  At the time of these studies, 72% of the women who saved chose investments that provided only marginal returns.   In order to keep up, women now need to be willing to take more risk in their investments.  This is counter intuitive to how many women of this generation were raised and educated.  To compound this difficulty, many financial advisors and brokers assume women want less risk and therefore fail to do the planning and education needed to help their clients see the risk-reward return and to understand a pace of investing that keeps up with inflation. 

How We Can Help

In our work over the years with married, divorced or never married women, the answer always seems to be the same: Advisors need to understand their client’s biases, feelings, and fears about money and retirement.  We need to make a concerted effort toward financial literacy and, most importantly, to provide a solid, comprehensive financial plan.  Education and planning enable our clients to see the impact of their spending, savings, and the aggressive/conservative balance of their investments. 

At Human Investing we accomplish this through our process called hiPlan.  The hiPlan goal is to give our clients the peace that comes from the stability of a plan that enables them to live out the retirement they have worked hard and dreamed about.