Women typically live longer, earn less money, and take care of loved ones more often than men. Couple these facts with numerous studies on investor behavior that show women approach financial decisions differently than men and we see that retirement planning should be treated differently, too.
Here are three retirement planning musts for women.
1. Make prudent investing choices
Research shows women place more emphasis on risk-return trade-offs than their male counterparts when investing. As a result, while women may not make as much money, they tend to lose much less as well. According to neuroscientist John Coates, "rising levels of testosterone can lead to irrational levels of exuberance." Because women produce about one-tenth the testosterone of men, they're less likely to act on hot stock tips and get burned by risky investments. And big losses later in life can seriously disrupt your plans.
Of course, there are also risks in being too conservative. Today's 65-year-old woman can expect to live, on average, until age 86. That means she'll likely need to fund more than 20 years worth of living expenses, which is difficult to do -- especially in today's low-interest-rate environment -- without exposure to at least some degree of risk.
The best solution is to prudently invest money, keeping in mind that as we near retirement -- and know our investments need to produce reliable income -- we need a different approach. For example, dividend-paying stocks make great investments for achieving both steady income today and the potential for capital appreciation tomorrow.
2. Take charge of your Social Security claiming options
Depending on your marital status, you'll face different considerations in deciding when to take Social Security. Carefully review your options before making any decisions that will impact your Social Security benefits.
If you're married, make a choice that maximizes your benefits as a couple over your expected life span. Spousal claiming strategies include "file and suspend," i.e., claiming spousal spousal benefits now but putting off your own benefit until later. If you're divorced and eligible for benefits on an ex-spouse's record, you may be able to claim a spousal benefit for a few years, then switch to your own higher benefit amount when you turn 70.
For single women who aren't eligible for anyone else's benefits, delaying Social Security is usually your best choice. Of course, that's assuming you have adequate income-producing assets or employment wages to do so. Because benefits are increased by up to 32% if you delay taking benefits until age 70, strongly consider postponing them if you can.
3. Carefully craft your long-term care plan
As a woman, the chance that you will need long-term care is roughly one in two, compared to the average man's one-in-three odds. Due to their statistical longevity, married women often care for their husbands and are later left to rely on family, friends, or professional caregivers for their own long-term care needs. So making your health and wellness a priority is an important aspect of your long-term care plan.
Plan on staying healthy and strong. Believe it or not, your weekly tennis match with your gal pals is actually a critical part of your retirement plan. Second, give serious thought as to how you might pool resources later in life. Will you depend on family and friends for your long-term care needs? If so, have you notified them? Which assets of yours or sources of income will you use to pay for long-term care?
Beyond that, strongly consider seeking insurance that helps cover the rising cost of care. Long-term care insurance like that offered by Genworth Financial and Manulife Financial's John Hancock covers home care, assisted living, and nursing home services that women are likely to need later in life. In fact, women receive two-thirds of the claims benefits paid by long-term care insurers.
With big insurers like MetLife and Prudential leaving this market and the underwriting requirements growing more stringent, long-term care insurance is becoming not only harder for women to obtain, but also more expensive. According to the American Association for Long-Term Care Insurance, the average cost of new policies for single females has been rising much more quickly than it has for both single men and couples. In fact, new policies for men actually dropped about 15% in price over the past year.
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Because of the unique circumstances you face as a woman, your retirement planning demands careful attention. Take the time to address these issues. Your financial future depends on it.
Nicole Seghetti owns shares of Manulife Financial (USA ). Follow her on Twitter @NicoleSeghetti. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.