Gender inequality isn’t just a workforce issue. There are significant differences between women and men when it comes to retirement readiness, life expectancy and financial philosophies related to retirement.

American women face several challenges when it comes to retirement. First, defined benefit pensions are disappearing. Baby boomers are transitioning to retirement in record numbers. Women live longer than men. And the smaller generations following the baby boomers are being asked to support the older generation along with their own healthcare and retirement needs.

In a report entitled Lifetime Income for Women: A Financial Economist’s Perspective, David Babbel, who’s a fellow at the Wharton Financial Institutions Center and a professor of Insurance and finance at the Wharton School, says some call the situation a “perfect financial storm.” For advisors, these factors can create a perfect opportunity.

Women have different needs than their male counterparts when it comes to retirement, as in many other areas. First, they tend to live longer: The average woman lives about five years longer than the average man. According to data from the Centers for Disease Control’s National Center for Health Statistics, in 2013, the average man could expect to live 76.4 years while the average woman could expect to live 81.2 years. Half of women live longer than that, some substantially longer.

In addition, according to the latest data from the Bureau of Labor Statistics, about 58.6 percent of the approximately 123 million women in the U.S. are in the labor force. That means more than 40 percent of women are not in the workforce, and even if women are working, they are likely to work in part-time jobs, which means they will not qualify for employer-sponsored benefits, including retirement plans. Many women who do participate in a retirement plan contribute much less than male counterparts, and they may have less saved because they are more likely than men to drop out of the workforce to raise their families. 

The extra years of life, the lack of company-sponsored retirement plans and smaller savings accounts add up to one clear truth: The average woman will need more money for retirement. Women in their pre-retirement years as well as those who are retired could greatly benefit from guidance from their advisors.

Babbel noted that there are three broad approaches individuals take as they approach retirement: annuitize a substantial portion of their accumulated wealth; invest primarily in fixed income instruments like CDs, bonds or money market funds; and invest primarily in stocks, bonds and mutual funds.

For women, “the annuitization choice is even more important to their economic well being than it is to the male population, because women will generally live several years longer, and most will do it alone for many years,” Babbel wrote.

He explained that men have a much higher risk tolerance than women, which affects their retirement finance choices. For instance, men are less likely to annuitize their wealth at retirement. Men are more likely than women to place their funds in risky investments, and married women, who generally outlive their husbands, have to live with the financial consequences of these choices. Married women are the least likely to take high financial risks.

“Taken together, the academic studies and survey findings suggest that women should be especially careful to secure a lifetime income,” Babbel wrote. “Annuitization remains the only way to achieve it at a reasonable price. Other alternatives might work, or they might not.”

In general, advisors can freely suggest annuities to their female customers. In his blog, Tom Hegna, economist, author and retirement expert, suggests that annuitizing a significant portion of retirement income can complement a portfolio of stocks and bonds.

“Fixed indexed annuities are an ideal product that can fit here,” Hegna wrote. “They can provide a low risk solution, generate guaranteed income for life, and offer protection from market risk. Investing the remainder of retirement savings into a well-diversified portfolio can help provide inflation protection. And by doing this, women can be better protected from the volatility of the market, which could potentially wipe out their entire retirement savings.”