The Mass Affluent women ($100K - $1MM of net worth, not including their primary residence), in general, are concerned about retirement and planning for a comfortable, worry-free retirement. The Mass Affluent tend to be older, with an average age of 59 with two-thirds of the group being age 55 and older, and they tend to be married. Indeed, roughly half are age 55-64, what many consider pre-retirement years. Of these, 85% plan to retire within the next ten years, with many planning to retire within the next five years. The Mass Affluent are not living off of their investments, generally. They are working people, as evidenced by the fact that among those Mass Affluent working full-time, only 9% of current total wealth is derived from investment income. Even among those who are fully retired, only 29% of total wealth is generated from investment returns.

Women Are Growing Aware of Crisis

Women are aware of the crisis they are facing, at least on an individual level. In a Spectrem January 2006 survey of retirement plan participants, when answered the question, “I fully expect to have sufficient income to live comfortably in my retirement” a robust 60% of respondents agreed with the statement. However, that number has steadily dropped from 55% in June of 2006, to 42% in January of this year, bottoming out at 33% in June 2007 and rising slightly to 38% in June 2008.

Mirroring that sentiment, in January of 2006 only 32% of women Spectrem Group surveyed agreed with the statement, “At the present time, my household is not saving enough to meet our financial goals”, as opposed to only 29% of men who agreed. That number has steadily risen in a year and a half, with 44% of women agreeing with that statement, in June of 2007. It has risen back to 51% in the last few months.

Women, even Mass Affluent women whether she be single or married, with children or without, need to be saving as much as reasonable possible from their income, as early as possible. They should to plan for a long life and, if married, they ought to plan for at least 6 years alone, without spousal support if they are the same age as their spouse and more if they are younger. Married women must not feel exempt from this crisis, despite the feeling of security a spouse’s retirement plan may give them. Couples need plan for every eventuality, especially the unpleasant ones: divorce, death, or a main bread-winner becoming incapacitated in some way, and unable to work and save. Retirement income vehicles like annuities and laddered portfolios should be set up to accommodate these eventualities and education needs to be in place to enlighten plan participants. The ugly truth is that a comfortable retirement doesn’t happen by chance or accident. A comfortable retirement requires planning and action.

Tough Planning to Do

Having a conversation with your female clients about the fact that they will most likely outlive their spouse, is not an easy discussion to have, but unfortunately playing off women’s anxiety about their future may be the best way to get them to act. Making them see the possible reality of their lives as elderly single women is both important to this strategy and a completely possible future reality for them. For advisors there exists an opportunity to help a portion of the population that will suffer without your advice and counsel, and to capture a larger percentage of the assets they have to offer.

Additionally, advisors need to engage with female clients, who need to be educated, informed, encouraged, and when all else fails, frightened into developing and executing a plan that realistically meets their retirement needs and addresses where they are in life, now. It’s easy for women to get distracted from the goal of a comfortable retirement. There are children and grandchildren to take care of, aging parents to tend to, bills to pay, and a plethora of other concerns pressing on them and their pocketbooks.

For more information: Affluent Women and Financial Decisions

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