Focus Female: Study Shows Big Financial Planning Opportunities for Knowledgeable Women's Market

Focus Female: Study Shows Big Financial Planning Opportunities for Knowledgeable Women's Market

Retirement literacy report from The Center for Women in Financial Services at The American College of Financial Services highlights desire to build a financially secure future, openness to financial advice

KING OF PRUSSIA, PA – January 7, 2021 – According to the latest Women’s Retirement Literacy Report from The American College of Financial Services, four out of five (82%) older American women report having a plan for retirement income. Yet the results reveal a staggering gap between women with an idea about retirement income options and the ones who have a formal, written retirement plan in place, which is just one in three of the women surveyed. The research also reveals nine in ten (94%) women with partners or spouses equally share or lead financial decision-making for their households, with female retirees and pre-retirees (ages 50-75) more open to financial advice than men.

This combination of decision-making power and openness to advice indicates that women are a critical audience for financial advisors. The study shows this is a clear opportunity for financial professionals to expand their business by providing guidance to women to build financial strategies and close the planning gap. Women reported retirement income planning, guaranteed lifetime income, and health and long-term care among the greatest areas of concern.

These findings are part of the third iteration of the Retirement Income Literacy Survey from The American College of Financial Services, testing consumers’ knowledge about retirement income concepts and focusing on the drawdown phase when Americans have limited or no ability to earn additional money through work. The 2020 study expanded the scope of those surveyed to include Americans ages 50-75.

“There are enough things to lose sleep over, but not having a financial plan should not be one of them,” said Hilary Fiorella, Executive Director of the Center for Women in Financial Services at The American College of Financial Services. “Advisors need to understand that women may come to the table with different approaches to retirement planning, with many thinking about finances holistically and maybe more conservatively than men. Whether that conservatism is based on fear or misinformation is an ideal place to start a conversation with an advisor. While this research suggests lower retirement literacy levels than men, women also demonstrate an awareness of their knowledge level, admitting what they don’t know and prioritizing financial education and advice – the sign of an ideal client relationship.”

 

Closing the Knowledge Gap: Retirement Income Planning and Finding Guaranteed Income are Key Focus Areas for Women

Retirement literacy remains low overall, with 89% of women and 72% of men receiving a failing grade on a 38-question retirement literacy quiz. The research suggests retirement income plans are less formal or not well understood for men and women alike, further underscored by consumers’ lack of confidence:

  • Only one in four women (14%) feel knowledgeable about retirement income planning.
  • Four in ten women (43%) feel less comfortable with investment risk because of the COVID-19 crisis.
  • Only 16% of women feel very knowledgeable about investment considerations for retirement planning, though self-reported knowledge seems to increase with age and assets.
  • Even fewer – 14% of women – feel knowledgeable about strategies for sustaining income in retirement.

Yet women demonstrate they are ready and willing to build a meaningful retirement plan. Six in ten women (61%) believe good advice from a financial professional is very important to satisfactory portfolio performance, more so than men who feel the same way.

Guaranteed income is also a major concern: seventy percent of women emphasize the value of guaranteed income sources, a total that is even higher among eight in ten (80%) Black women and Hispanic women (77%). Yet despite this perceived importance, women rate their own knowledge as low when it comes to the sources to build a guaranteed lifetime income:

  • Only two in ten (20%) women feel highly knowledgeable about Social Security.
  • Only one out of ten (10%) respondents feel educated about annuity products in retirement.

“Women are concerned about running out of money in retirement and more than half want their advisors to educate them on strategies to protect against investment risk and on how to prudently spend each year to ensure they don’t outlive their assets,” said Timi Jorgensen, PhD, Assistant Professor and Director of Financial Literacy at The American College of Financial Services. “Women and their advisors should prioritize understanding of retirement savings vehicles and how guaranteed income fits into a retirement income strategy.”

 

Long-Term Care Fraught with Concerns, Misconceptions: Gap Exists Between Care Need, Funding Plan

Women outscored men on the understanding of who pays for long-term care, though only three in ten women (30%) correctly stated that most expenses are paid for by Medicaid, compared to just one in five men.  Still, half of women express a high level of concern about the cost of healthcare in retirement, with one-third (34%) saying they worry about paying for long-term care expenses.

Only 12% of women feel highly knowledgeable about long-term care, and the research reveals a sizable gap exists between believing long-term care is likely and having a funding plan to support it:

  • 50% of women expect to require long-term care in the future, yet fewer than three in 10 (27%) have a plan to fund a long-term care need.
  • Only one in four (27%) women claim they own any type of insurance that would cover long-term care needs.
  • Black and Hispanic women are less likely to believe they will develop a care need, even though national studies suggest Black and Hispanic women are especially likely to be caregivers, and caregiving can negatively impact their health.

“There is a troublingly low level of self-reported and tested knowledge surrounding long-term care needs,” said Jorgensen. “Long-term care is a critical issue for this audience, and advisors can help women close the gap from theoretical to practical in terms of expected long-term care need and how it’s paid for.”

For more information about the Retirement Income Literacy Survey results and to take the quiz, visit theamericancollege.edu/retirement-income-literacy-survey

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STUDY METHODOLOGY
The American College of Financial Services commissioned Greenwald & Associates for the study. Respondents were asked a number of knowledge, behavior, and attitudinal questions to assess retirement literacy among individuals who are approaching or already in retirement. Information for this study was gathered through online interviews with over 1,500 Americans, including conducted between April 29 – May 18, 2020 (821 women, 688 men). To qualify for participation in the study, respondents had to be ages 50-75 and have at least $100,000 in household assets, not including their primary residence.

ABOUT THE AMERICAN COLLEGE OF FINANCIAL SERVICES
The American College of Financial Services was founded in 1927 and is the nation’s largest nonprofit educational institution devoted to financial services. Holding the highest level of academic accreditation, The College has educated one in five financial advisors across the United States and offers two master’s degrees in management and financial services, along with prestigious financial planning designations such as the Retirement Income Certified Professional® (RICP®), Chartered Life Underwriter® (CLU®), Wealth Management Certified Professional® (WMCP®), Chartered Advisor in Philanthropy® (CAP®), Chartered Special Needs Consultant® (ChSNC®), Chartered Financial Consultant® (ChFC®), and education leading to the Certified Financial Planner™ (CFP®) certification. The College’s faculty represents some of the foremost thought leaders in the financial services profession. Visit TheAmericanCollege.edu and connect with us on LinkedIn, Facebook and Twitter.

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