A powerful financial vortex of personal and economic factors combined with unexpected life events continues to hamper the retirement preparations of many Americans, but a recent survey report shows the picture is even more complicated for baby boomer women in their early 60s.
In fact, according to a new spotlight supplement drawn from Goldman Sachs' annual retirement survey, such obstacles can especially diminish the ability of working women to save money both in the short term and for retirement — often with significant negative cumulative effects. Income disparities alone can lead over time to a 24% shortfall in retirement savings compared with commonly suggested targets, according to the report.
However, as Kimberlee Davis, an author and advisor at The Bahnsen Group, told ThinkAdvisor, there is still room for optimism.
As Davis emphasized, women face challenges saving for retirement because of decades-long income differences, increased caregiver responsibilities, insufficiency of part-time work, longer life expectancies and lower benefits from Social Security.
"The picture we face is really a financial vortex, so I appreciate that the Goldman Sachs report uses this terminology," Davis said. "I'm experiencing this first hand. I'm 65 and my parents are in their 90s. My kids are in their 30s. When I was their age, people weren't living to 100, but today, things are so different. … We have so many people my age who are in the sandwich situation."
The good news, Davis said, is that the financial industry is waking up to this challenge, as are more women and their families. This is reflected in some positive data points, she said, such as female respondents reporting lower stress in managing savings and higher confidence in their ability to meet their goals compared with earlier editions of the survey.
The bottom line is that fiduciary financial advisors have an obligation to tackle the retirement savings gap head on, Davis argued, and doing so will represent a win-win as women who are now in their 50s and 60s stand to inherit substantial amounts of wealth in the decades ahead.
Caregiving and Social Security
The data published by Goldman Sachs shows women continued to make progress in preparing for retirement over the past year, but significant headwinds remain. This is especially the case for women who identify as caregivers.
According to the survey, some 61% of family caregiving in the U.S. is managed by women. Meanwhile, 40% of working women report having left a job for caregiving, including 21% who report leaving a full-time job for part-time work to care for either children or older family members.
Women are twice as likely as men to leave the workforce for more than a year in such circumstances.
Davis said she has grappled with this challenge herself, having seen her own career progress put on hold earlier in life while her kids were growing up. She added that her personal view is that Social Security should be reformed to recognize these facts — that women who have to leave their jobs in order to address otherwise unmanageable or unaffordable caregiving work don't deserve a lower Social Security benefit as a result.
