Women will drive boomer retirement

By now you are probably tired of hearing that baby boomers are going to change retirement.

By now you are probably tired of hearing that baby boomers are going to change retirement. The fact is, they are. Yet despite all the talk, the financial services industry still remains mostly unprepared — largely because they don’t see how major societal shifts are changing the very practical financial needs of boomers.

Let’s examine one area where this is particularly the case: the big changes that are taking place among women.

First, some background.

Boomers are the first generation in which a majority of women have been (or are) in the work force. In boomer households, 63% of women work.

This will affect retirement in several crucial ways:

A greater voice. Many boomer women have earned their own money and will decide how it is spent, saved and invested. Unlike in earlier times, women take part in a family’s financial decision making, and are often the sole decision maker.

Even if they don’t work at all or don’t earn as much as men, today’s women are more likely than those of earlier generations to be involved with every aspect of the household’s financial decisions, including retirement.

Woe, then, to the financial adviser who doesn’t include the woman in the household’s financial planning process.

A different retirement. In the past, when the household head was typically the sole source of income, the household “retired” when the wage earner retired. With three-quarters of boomer households having two wage earners in 2006, many boomer households won’t be “retired” until both earners retire.

Instead of being clearly classified as retired or not retired, boomer households are likely to spend many years in a more vague and unsettled life stage that may be called semi-retirement, revolving retirement, working retirement, non-retirement, re-retirement or some other name that reflects a midway stage between full-time work and traditional retirement.

And while there is no universal term to describe that in-between life stage yet, there is a word describing two-earner households where one person retires without considering the other — divorced.

In households with working male and female heads, the woman is typically younger than her husband, lives longer and is more likely to have gaps in her employment history. As a result, women are likely to remain in the work force after her male partner has retired.

Because of their greater longevity, female household heads typically face more years in retirement than males.

And since widows are far more common than widowers, the female household head will require more money to maintain her married living standard than if she went into retirement after being single.

Gaps in women’s employment may mean that a woman will stay in the work force longer than her male counterpart in order to reach the career level for which she was striving.

All this suggests that boomer women will want to work for a longer period and will need more money to maintain their lifestyle for a longer time.

Different worries. Women’s concerns about retirement differ from those of men. Many boomer women realize that the responsibility of caring for children and aging parents falls disproportionately on their shoulders, regardless of whether they work.

And they realize that their caretaker role may extend into the future to include ailing peers — brothers, sisters and friends — and dependent adult children, a group that has expanded due to medical advances.

Facing a retirement that includes financial, psychological and emotional responsibilities, women necessarily must be concerned with maximizing returns for their retirement, as well as making provisions for the care of others, should they not be around.

All these factors should make financial manufacturers, providers, distributors, marketers, regulators and intermediaries sit up and take notice. Today’s realities for today’s women are much different from what we have come to expect.

How the financial services industry will deal with changing values and the changing problems of financial decision makers will be the challenge of the early decades of the 21st century.

Larry Cohen is vice president and director of consumer financial decisions at SRI Consulting -Business Intelligence in Princeton, N.J. He can be reached at [email protected].

For previous Retirement Watch columns and the online column, On Retirement, go to investmentnews.com/retirementwatch and investmentnews.com/onretirement.