How inflation is impacting women who want to retire, according to an expert

Author: Rachelle Akuffo

Date: 3/1/2023

ALI Education Fellow Suzanne Norman joins Yahoo Finance Live to discuss how inflation is challenging women who are aiming to retire, the ongoing wage gap, rising health care costs, and the outlook for retirement.

Video Transcript
[AUDIO LOGO]

RACHELLE AKUFFO: Women were hit hard by the pandemic. And now with recession concerns and sticky inflation, women close to retirement are worried about where they stand. 62% saying they expect to retire later than they originally planned. Well, joining us now with how women can protect themselves in retirement is Suzanne Norman, Alliance for Lifetime Income Education Fellow. Thank you for joining me in this morning, Suzanne. So as we look at this picture here, even as we think about how inflation is affecting women, 57% postponing retirement because of inflation. Talk about the position that is unique to women as we sort of try and navigate this space.

SUZANNE NORMAN: Thanks so much, Rachelle. It’s great to be here, and it’s my favorite topic. One of the things that I like to level set for everybody, just because not everyone is aware of some of the challenges women face, but it’s something that is on my mind all the time, which is, we have much longer life expectancy than men. A 65-year-old woman can expect to live to age 87, which is a few years longer than men. And that, again, is an average.

The other thing is, we haven’t necessarily earned as much money. We have a wage gap compared to men. And that’s an average as well that gets worse depending on what sector you’re in. If you’re a Latina, a Black woman, a mother, it’s even less than that, 82%. And then that impacts our savings because we’re also out of the workforce taking care of our parents, of our children. So we have less retirement savings. And our health care gets even more expensive in retirement because we are living longer.

So these are things that are on my mind. When I think about helping women, particularly in light of what we saw last year in the markets, is really, I guess, first and foremost, have a plan, have a financial plan, and get it in writing and update it. Things change. You get divorced, you take care of your parents, you take care of children, sometimes all at the same time. So have that written plan so that you know what’s going on.

And foundational to that is a budget. So knowing what your inflow and outflow is really critical, no matter where you are, but particularly if you’re a woman planning for retirement. Knowing what your needs are, your wants, those necessities, and then making sure that those essential expenses are covered. And one of the things we’ll talk about today, I’m sure, are the role that annuities play in covering those essential expenses in retirement.

RACHELLE AKUFFO: So let’s first start by setting the stage when it comes to a financial plan. You mention a budget. What are, say, two or three other things that you really need to have in a financial plan to get an actual idea of what you’re working with and the risks you could perhaps be preparing for?

SUZANNE NORMAN: Thanks, Rachelle. I think the most important thing is what people are doing today. So if you’re an investor, if you’re an advisor, you’re dialing in and you’re educating yourself. So knowing what you need in your life, what your goals are, is really critical when you start thinking about what this financial plan looks like. Another thing that I mentioned, it’s that time of year, we saw that the ability to defer more savings.

And if you’re contributing to a 401(k), if you’re over 50 as a woman, you can now contribute up to $30,000. And the other thing that I think about when you go into budgets is, annuities are also a great tax deferred savings vehicle for a woman, especially if you’re trying to play catchup for retirement savings.

RACHELLE AKUFFO: So as you talk about annuities there and perhaps what people should be asking their financial advisors about this, what are some of the top things that women should keep in mind when it comes to annuities versus, say, other investments that they could be making?

SUZANNE NORMAN: Thanks, Rachelle. That’s probably the number one question I get all the time. And one of the things that we’ve seen with record sales and annuities last year more than we’ve ever seen is that they’re giving peace of mind to the investor. We saw a lot of volatility in the market, which is concerning for everybody. And the peace of mind that we’re seeing, having that secured income, that guaranteed income in retirement, can’t be overstated.

When we think about the trends that are in the retirement space right now, traditionally, retirement was coming from three sources. We called it the “three-legged stool.” You had pensions, Social Security, and income from personal savings. But right now, we look at pensions, only about 4% of companies are offering them. So very few investors have access. So when we think about what the annuities role is and essentially giving you a personal pension, it’s no surprise that that’s giving people a sense of stability in having that stool more stable.

And people ask all the time, what annuities am I seeing? Well, we see the most popular ones out there– fixed annuities, variable annuities, fixed indexed annuities. But I always come back to that plan and the fact that if you’re working with an advisor, they know your personal situation. So they’ll know the right tool, the right annuity to accomplish your retirement goals.

RACHELLE AKUFFO: And of course, a lot of people having one eye on what’s happening with Washington and discussions over Social Security. And in 2024, the US is going to have more people over the age of 65 than at any other time in US history. What should people keep in mind about Social Security so that they can perhaps be a bit nimble if there are any changes that they need to be bracing for?

SUZANNE NORMAN: That’s a great point, Rachelle, and thank you, because we talk about that 2024 as being peak 65. For those of you who haven’t visited our protectedincome.org website, we have a lot of research there. And certainly, we have a lot of academic research, a lot of [INAUDIBLE] academic, as we call it, talking about Social Security. So I would certainly, as an educator, always tell people, please get a login for Social Security, so know what that looks like.

Most people are considering that Social Security won’t be enough for them to have the lifestyle that they want. So again, that’s where we’re seeing annuities having that ability to protect and grow your retirement savings, to augment Social Security. So I would certainly encourage people to visit our website for a lot of the education resources, and also have a plan that may be helping you, through annuities, have extra income to meet your essential expenses.

RACHELLE AKUFFO: And just very quickly as we’re almost out of time here, in terms of changing the company culture of some of these corporations that already do put women on the back foot when it comes to having this wealth gap, what would your top recommendation be if you could get the ear of corporate America?

SUZANNE NORMAN: Well, if we could get the ear of corporate America, I would definitely say, get that education, have the plan, make that part of the conversation you have inside the company. And certainly, it’s Women’s History Month. Happy Women’s History Month, by the way. And we have an opportunity as women to really take control and take a look and talk to our advisors about what our futures look like and what that guaranteed income source will be to meet the essential expenses.

And if you’re an advisor listening, I would say to you again, clients and investors are asking for these solutions. So yes, Rachelle, the companies are a great place to start. There’s a lot of education wellness happening. In fact, I wrote a paper on that, which is on protectedincome.org. So I’d definitely have companies take a look at that. And I’d encourage advisors to really talk to their female clients about what their concerns are about meeting essential expenses.

RACHELLE AKUFFO: Lots of great advice there. I do appreciate you joining me this morning. Suzanne Norman, Alliance for Lifetime Income Education Fellow. Thank you so much.

Stay informed with the latest updates on protected income planning.