By: Ian M Maddox, CRPS®
ENJOY (60+): The Planning Phase
The current cultural climate seems to suggest risk to anyone willing to compare or contrast behavioral differences between men and women. Unfortunately, wealth management professionals really can’t avoid these comparisons. Our job is to help people, whomever they may be, to navigate a plethora of often complex financial decisions and that guidance must incorporate hard data. In this regard, women do not make retirement decisions in the same way that men do. In fact, in my professional opinion, one of the common behavioral strengths amongst women can also be a detriment when it comes to financial planning during retirement. Women tend to be more nurturing and put others needs before their own. For that reason, wealth management professionals should not use a one-size-fits all planning methodology when it comes to female retirees.
Let’s look at some data. Generally, Americans have cut back on expenses traditionally associated with retirement, like entertainment and travel, according to data from retirement planning product provider Global Atlantic Financial Group. Retirees are spending 29% less on entertainment, 24% less dining out, 18% less on travel, 23% less on mortgage payments, and 22% less on rent1. While this may not be beneficial to our consumer-based economy in the near-term, it is a boon to the probability of financial sustainability for the retiree. This trend accelerated after the “great recession” and continues today.
Unfortunately, over half of those surveyed (55%) admitted to feeling regret over the way they handled their retirement planning. In-other-words, for some retirees, recent austerity may still be reflected on as too-little-too-late. This can be particularly true for women, according to the survey. Why so? Well, it goes back to the female tendency to put others ahead of themselves. If many retirees do not feel as prepared as they should be, it is even more-so amongst women.
Whether it is paying for children’s college education or caring for an aging parent that has caused them to save and plan less, women’s longer life expectancy compounds the issue. So, what actions can women retirees and their advisors do to address these challenges. First, to the women planning for retirement, I would encourage you to seek out a plan to guide your decisions. There are wealth managers that are naturally skilled in this area and even firms that cater specifically to women. Ask your friends and conduct phone interviews before scheduling an appointment.
In our practice we incorporate an analogy that links the heart, mind and wallet. The heart is our emotions and how our feelings impact our decisions. The mind is logic, data, and how we process information. Lastly, the wallet is a measure of our resources. Regardless of the size of the wallet, a financial plan for retirement needs to strike a balance between the heart and mind. If we know that women lean towards the heart, this needs to be discussed in a meaningful way from the very beginning of a client advisor relationship. When this is done well, the heart and mind will balance and, in my experience, lead to a greater probability of success in hitting planning goals.
About Hitchcock Maddox Financial Partners (HMFP):
HMFP is a comprehensive and collaborative financial planning firm headquartered in Trussville, AL, serving clients and their community since 1999. Collectively, HMFP advisors have provided guidance in the areas of Financial Planning, Investing, Retirement and Insurance for over 35 years. For more information please visit www.hmfp.us or call 205-201-1401.