DAC: Communication key to couples planning

“People often think that men and women are the same in terms of being prepared for retirement,” she told Advisor.ca, a few days before she gave a speech on this topic at the Knowledge Bureau’s Distinguished Advisor Conference. “But there are differences and that’s not often communicated to the other spouse.”

Penner’s presentation showed that 83% of women are concerned about their purchasing power in retirement, compared to 69% of men.

“The most common thing I see is that women are concerned about being a bag lady,” she says. “Their lifespan is longer and a lot of times they’re not involved in the financial planning process, so they’re more worried about money than men are.”

When it comes to preparing for retirement, 33% of women, versus 29% of men, say they’ve made no adequate financial preparations for their golden years.

“Women are saying that they’re not sure if they’re prepared enough for retirement,” says Penner. “Men don’t often give it a second thought. They feel if they don’t have enough money they can go back to work for a bit. It’s not the same for women, particularity if they haven’t been in the workforce for a while.”

Penner points out that women are more willing to cut their losses on losing investments, with only 35% holding on compared to 47% of men. This can have a long-term impact on performance. She says men often sabotage returns by 2% because they keep stocks longer than they should. “Men focus on returns; women are more focused on the bigger picture,” she explains.

While these statistics are telling, they’re meaningless if advisors don’t pay attention them. It’s not enough to develop a plan with one half of a couple, both partners’ needs must be addressed, but this can be tricky, especially if the spouses haven’t discussed their differing retirement ideas with each other.

“A lot of times I’ll meet with a couple and it will be the first time they’ve talked to each other about their views,” says Penner. “I say, ‘what’s going to happen now is that you have to understand what the other person wants.’ If the husband just wants to golf and the wife only wants to travel, the advisor has to take both views into account and plan to have enough money for that.”

Penner admits that while spouses are sometimes caught off guard by how their partner wants to spend their retirement, in most cases they know they have conflicting ideas — they’re just not sure how to reconcile them. “At that stage it’s up the professional to help figure out how they can handle that,” she says.

Of course, a couple’s post-working goals won’t be realized if they’re seeking advice a month before retirement. Advisors should uncover these differences early on so they can make accurate retirement projections. Still, no matter how early you plan, partners might not see eye to eye.

“They might not agree with what the other person wants to do,” says Penner. “That’s not a financial planner thing, that’s more of a human dynamic between men and women and some advisors are better equipped to deal with that than others.”

Penner says she always gets her client couples talking about how they view their finances in her first meeting with them. “They can always adapt to it and it gives them more time to think about things.”

And it’s not just statistics and different retirement goals the advisor needs to worry about. Penner says women compromise more than men, which could be an issue. “The advisor needs to acknowledge that, and is there any way they can accommodate it?” she asks.

It may be prudent to suggest that the women retire first, says Penner. She explains that females are better than men at keeping themselves busy. “Women adjust a little more because their lives are multi-dimensional. When men stop working they don’t know what to do with themselves.”

She also says the first six months of retirement are the most stressful, and that this period is when most heart attacks occur, so it’s important for one person to make the transition early in order to help the other one deal with a new non-working life.

Clearly, men and women view their financial futures in different ways, but one thing that doesn’t have any gender biases, says Penner, is risk tolerance. She thinks men and women are equally prone to aggressive buying, or staying on the sidelines, depending on their investment profile.

But there is one advantage that women have over men: “I have clients that are equally high risk,” says Penner, “but women have a better understanding of what that means. They don’t react as much if the market goes down because they know they’re more aggressive.”

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com

(11/21/08)