Women are more afraid of becoming "bag ladies" than men, and it makes them approach investing and saving for retirement differently, assuming they have managed to tackle either of those chores, say financial advisors who deal with large numbers of female clients and have many clients in or nearing retirement.
The bag lady image is an exaggeration in most cases, but "the fear factor is much greater for women, who think more about running out of money before they die than men do," says Theresa Hannon of the Theresa Hannon Financial Group in Wheaton, Ill.
The fear factor is not completely misplaced since, in general, women earn less than men so they receive smaller pensions and Social Security benefits, they are less well educated about investing, and they live longer than men and therefore need an income for a longer period of time, the advisors say.
A recent study by MassMutual's Retirement Services Division shows the "fear" gap growing between women and men, with 75% of women now concerned they will not have enough money for retirement compared to 62% of men. Last year, the gap was 70% for women and 63% for men.
Twice as many men have confidence the market will rebound than women, which affects attitudes toward investing and reinforces the women's tendency to be more conservative investors, the study says. But conservative investing can have both good and bad results, advisors warn.
The survey was based on responses from 1,517 participants in MassMutual retirement plans. Women made up 33.3% of the survey, with the largest group of respondents in the 50 to 59 age range (39.8%). The overwhelming majority were Caucasian (80.3%) and the largest group (40.3%) had household incomes between $50,000 and $99,000.
"We have been doing surveys since 2007 because we want our plan sponsors and their advisors to be better able to help their participants by knowing their audience. With accurate data, they can focus on the differences in their plans' populations," says Elaine Sarsynski, executive vice president for MassMutual's retirement services. "For instance, women have a natural conservatism and are not as focused on investments as men. Knowing the plan participants, the sponsor can target the program and benefits appropriately."
Somewhat surprisingly, many women still leave investment and retirement planning decisions to their husbands. "Whenever you have an older couple, almost invariably the husband is making the investment decisions," says Matt Zagula, founder and president of the Estate & Elder Planning Center in Weirton, W.Va., a fee-based financial and estate planning provider.
"Part of that is due to a time factor in that most women in a couple handle the checkbook and immediate finances of the household and men handle the investments," he adds. "This leads to many women being more concerned with income rather than just accumulation of assets and leads to them being more conservative in investments. Advisors need to understand that."
The situation in which men still control the investments is beginning to change, says Kimberly Foss, CFP and president of Empyrion Wealth Management in Roseville, Calif. "But I am shocked the gap is still so wide, even among some younger women," she admits. "I have 30-year-old women clients who still say they know nothing about finances.