James Sullivan

Why Women’s Retirement Planning Needs to Go Beyond a Longer Life Expectancy

The special retirement planning needs of women involve more than extended life expectancy over men. They include issues such as divorce, family, work history, care giving responsibility and healthcare costs.

October 11, 2011
by James Sullivan, CPA, PFS

Ellen admits that she is probably a prototype for everything that can go wrong in a woman’s financial life. Now 68-years-old, her financial life since her divorce at age 40 has left her with very little for her retirement:

  • Ellen estimates that the bitter divorce proceedings cost her at least $50,000 in legal fees most of which came from her savings, although her father helped with some of the bills. Ellen never remarried.
  • A stay-at-home mom, she won custody of her still young (ages eight and 11) children. While they were home, she worked only intermittently.
  • Once the children were grown, she found a job with a national real estate firm. But she was limited in the assignments she could take (the job required frequent travel) because she was taking care of her father. He lived in her home until his death at age 94. She believes care giving hurt her chances for promotions and a higher salary.
  • The year before she lost her job, she withdrew $40,000 from her 401(k) plan to give her daughter and husband who were struggling financially.
  • Her son, now in his late 30s still lives with her, but does not contribute financially to the household despite having a job.
  • At age 66 she lost her job when the real estate market crashed. Still healthy, she had planned to work until age 70.
  • Without her salary, she could no longer afford her home and had to arrange a “short sale” of her home with the bank.
  • With large credit card debt she could not afford the monthly payments, she worked with a credit-counseling agency to enter a debt-management program.
  • She has taken a part-time job as an office manager of a local law firm, but still has trouble making ends meet. Her only other source of income is Social Security and $500 a month, which she withdraws from what remains of her individual retirement account (IRA).
  • Her family has a history of long life. Both her parents enjoyed long lives (her mother died at age 86). She expects to live into her 90s.
  • Ellen’s only health problem is her hearing. She cannot afford a hearing examination let alone the high cost of a hearing aid. She does not want to ask her son for the money because she likes him living with her and is afraid that she will be lonely, if he moves out.

Unfortunately, Ellen’s story is not unusual. Divorce, staying home to raise children, intermittent working history, cares-giving responsibility and ongoing support of adult children, all of which have combined to provide Ellen with a financially unstable retirement. True, some of her problems were of her own making — it is always easy to criticize a mother (or father) for supporting their adult children if they are not your adult children. But because Ellen’s story is not uncommon, it is important to understand the special retirement planning needs of women.

More women than men worry about being able to afford healthcare and long-term care in retirement. As Ellen’s story shows, women have reason to be worried according to a new report by the Scripps Gerontology Center at Miami (Ohio) University and the MetLife Mature Market Institute, Women, Retirement and the Extra-Long Life (September 2011).

Women are aware that they are more likely than men to live into their 90s and that their life expectancy is eight percent longer than that of men (the life expectancy for women is 84; for men it is 81). This means that women will spend, on average, 22 years in retirement versus 19 years for men. As the study points out, however, the majority of women do not plan for the added financial needs this longevity imposes. In fact, only 34 percent of women responded that they are responsible for retirement planning in their households.

The CPA planner should look at this lack of additional planning by women as an opportunity to serve that market. Whether a woman is single or married, the need for the special planning needs is obvious, but often underserved.

Other Issues for Women in Retirement

But long life is not the only reason women and their advisor need to address women’s retirement needs. Other issues include:

  • Women do most of the nonpaid care giving by an almost two-to-one margin over men. The average cost to women of providing the care in terms of lost wages, reduced Social Security benefits and pensions is $324,044 versus $283,716 for men.
  • Long-term-care needs impose a direct cost on women. Not only do they provide care at significant economic cost to themselves and their family, they are more likely to need care later in life. Unlike men, women are more likely to be alone at this time of their life and do not have a spouse to provide care. As a result, according to the Society of Actuaries, long-term care purchased by women during their lives averages $124,000 versus $44,000 for men.
  • Women spend more overall on healthcare than men during their lives: $361,192 versus $268,679. Almost one-half or the difference is due to their longer lives.
  • Women’s work history is more sporadic than men (although this difference has shrunk). Many worked part-time or dropped out of the workforce altogether to raise a family; as noted above they are much more likely to provided nonpaid care resulting in a large financial loss. These losses mean women enter retirement with fewer assets and lower income than men.
  • Women are much more likely to be alone in their later years. Whether due to divorce, having remained single all their lives or widowhood, only four in 10 women ages 65 to 74 are married; for men, seven out of 10 are married. This difference only increases in later years. Being single imposes a variety of added costs on women, especially their need for care as they age. 

The Advisor’s Role

Unfortunately, despite their greater need for planning, women lag behind men in calculating their financial needs in retirement. According to the Scripps survey, only 55 percent of women have calculated their retirement income needs compared to 65 percent of the men. When it comes to estimating expenses, only 44 percent of women have done the calculation compared to 58 percent of men. Among couples, only 34 percent of women indicate they are responsible for financial planning in their home compared to 61 percent of the men.

Whether working with a single woman or a married couple, CPA planners must be sensitive to the special retirement-planning needs of women. It begins with education. For a single woman, projections should include the longer life expectancy and a discussion of her potential need for long-term care. In the case of a married couple, it is just as important that the husband understand the special planning needs of his wife should he pre-decease her, just as she should.


The special financial planning needs of women are an important, growing market for financial advisors. With a little education, CPA planners are in an excellent position to provide real value to all women, especially those all too familiar with Ellen’s story.

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James Sullivan, CPA, PFS, works with his wife, Janet, who is an elder law attorney in Naperville, IL.

* The AICPA’s PFP Section provides information, tools, advocacy and guidance to CPAs who specialize in providing tax, retirement, estate, risk management and investment advice to individuals and their closely held entities. PFP Section members, including PFS credential holders will benefit from additional resources on this topic in Forefield Advisor on the AICPA’s PFP website at aicpa.org/pfp. All members of the AICPA are eligible to join the PFP section. For CPAs who want to demonstrate their expertise in this subject matter, apply to become a PFS Credential holder.