Less Than Half of Women Know How to Make Their Money Last in Retirement
Greater understanding needed to bridge the retirement savings vs. retirement income knowledge gap
The Alliance for Lifetime Income and HerMoney's latest research finds that while nearly three in four (73%) women know what steps to take to build their retirement nest egg, less than half (47%) know how to make their money last throughout retirement.
This uncertainty has created a major point of concern. Half (52%) of women rank running out of money as one of their top two concerns when it comes to retirement and retirement planning, including 46 percent of the highest earning women – those with $200k or more in annual household income. These new findings are from chapter three of the State of Women 2022 study conducted in March 2022 among over 1,000 women who are members of the HerMoney community.
Saving for retirement is a priority across income levels
The good news is that nearly all women surveyed (91%) are making contributions to a 401(k), IRA, 403(b) or other dedicated retirement investment vehicle – and 55 percent are saving 15 percent or more of their income for retirement. Even among women who have less than $100k in annual household income, retirement saving remains a clear financial priority – 83 percent are making contributions and more than a third (36%) are saving 15 percent or more of their income.
"It's striking that today, 40 years after 401(k)s came into the mainstream, the vast majority of women in the HerMoney Community know how to accumulate enough money for retirement but are still scratching their heads when it comes to making that money last," said Jean Chatzky, Alliance for Lifetime Income Fellow and HerMoney CEO.
More than half believe they need at least $3 million to retire
Women are looking for solutions to alleviate their concerns about running out of money. Strikingly, HerMoney and the Alliance found that more than half believe they will need at least $3 million in their nest egg to retire comfortably – a figure significantly higher than the oft-cited $1 million figure.
"The women we studied are almost solely focused on saving as the end all be all for retirement when it's equally important to build a retirement income plan that will make your money last," Chatzky added. "It's not surprising then that four in ten (40%) women say protected income – a pension or investment that provides a paycheck for the rest of their life – would alleviate their concerns about running out of money."
Protected income can only come from three sources: Social Security, a pension or an annuity. However, most women surveyed do not associate protected income with an annuity. That lack of knowledge about annuities leads to just 3 percent of women saying purchasing an annuity is extremely important to securing their future.
"Many financial professionals have done a disservice to retirement savers by focusing exclusively on just investing and accumulating savings for retirement," said Jean Statler, CEO of the Alliance for Lifetime Income. "I'm not at all surprised that women are saving more, but so many still don't know how to make that money last for 20, 30 or more years in retirement. It's critical that we change that, especially given today's market volatility and uncertainty, by helping women shift their thinking to retirement income planning and consider protected income from an annuity to help ensure they never run out of money."
HerMoney and ALI recommend working with trusted financial professionals who are knowledgeable on retirement income planning. As this research shows, the 44 percent of women who work with a financial professional, are significantly more likely to know the steps to take to make their money last in retirement (58% vs. 39%).
Statler continued, "Women control a third of total US household financial assets today—more than $10 trillion—and $30 trillion more is expected to shift into the hands of US women over the next three to five years. Any financial professional who isn't thinking daily about how to better meet the wealth management and retirement income needs of American women simply isn't paying attention. The economic strength of women in our country today is profound, but that doesn't mean they don't want advice."
Women can themselves learn a lot about retirement income planning by going to the right online resources and tools that are objective and simple to use. The Alliance and HerMoney have a variety of tools and guides to help demystify retirement income planning.
The State of Women 2022 is based on an online study conducted in March 2022 among over 1,000 women who are members of the HerMoney community. They range in age from 18 to 75, most are college educated and employed full time. Two-thirds are married or partnered.
About Alliance for Lifetime Income
The Alliance for Lifetime Income is a non–profit 501(c)(6) educational organization based in Washington, D.C., that creates awareness and educates Americans about the value and importance of having protected lifetime income in retirement. Our vision is for a country where no American has to face the prospect of running out of money in retirement. The Alliance provides consumers and financial advisors with educational resources, interactive tools, and actionable research and insights to use in building retirement income strategies and plans. We believe focusing attention and conversations on retirement income that lasts throughout life leads to greater retirement security for millions of Americans.
About HerMoney Media
HerMoney is a new digital media company focused on improving the relationships women have with money. Started by personal finance expert Jean Chatzky, the mission of HerMoney is to level the playing field for financial security, confidence and power with content that is welcoming, thought-provoking, bold, unbiased and always smart. HerMoney delivers the information women need to manage their money so they can focus on their lives. HerMoney Media is the owner of HerMoney.com, as well as DailyWorth.com.
SOURCE: Alliance for Lifetime Income