Women’s retirement savings run out faster under traditional investment plans, new study finds

A new Monash University study found that women were at higher risk of exhausting their retirement savings than men when relying on the traditional 60/40 investment mix of equities and bonds for a comfortable lifestyle.

The report, titled “The Future of the 60/40 Allocation: Modeling the Performance of the 60/40 Portfolio in Retirement,” used computer simulations to examine retirement outcomes in Australia and the United States.

The study tested how well the classic 60/40 strategy, which allocates 60% of savings to equities for growth and 40% to bonds for stability, could support retirees over a 25-year period, either at a comfortable lifestyle of $53,289 a year or a modest lifestyle of $34,522 a year for single retirees, as defined by standard benchmarks in Australia.

The research was led by experts from the Monash Center for Financial Studies (MCFS) at Monash Business School in collaboration with the US-based CFA Institute.

The researchers found that women, who typically retire with lower superannuation balances in Australia and lower Social Security benefits in the United States, faced greater financial strain under the traditional 60/40 investment approach.

MCFS senior research fellow and lead author of the study, Dr. Bei Cui, said since women have fewer external income streams, they were more likely to run down their savings earlier, especially if aiming for a comfortable lifestyle.

“The 60/40 strategy only works well when several conditions align, such as higher savings balances at the start of retirement, modest lifestyle expectations and positive early returns,” Dr. Cui said.

“Many believe the 60/40 portfolio provides a safe balance, but in practice it does not deliver the same security for everyone, particularly for women who begin retirement at a disadvantage.”

The report calls for retirement planning that is flexible and tailored to individual needs, including savings levels at the start of retirement and lifestyle goals.

The study concluded that a single investment formula, such as 60/40, would not be enough and called for more flexible retirement planning. It recommended withdrawal strategies that adjust to market conditions and greater financial literacy to help retirees, particularly women, understand the risks and trade-offs.

MCFS Deputy Director and co-author of the research, Associate Professor Ummul Ruthbah, said that retirement outcomes depend heavily on when you retire, your starting balance, and your spending needs.

“Portfolios for both men and women are hit hard if investment returns are poor in the first years of retirement, but since women’s balances are typically smaller, their portfolios are likely to deplete faster,” Associate Professor Ruthbah said.

The research called for integrating additional financial resources, government benefits, and tax considerations into retirement planning, and better government policies to improve financial literacy among retirees regarding the complexities of retirement income planning.

Another co-author of the study, Associate Professor Nga Pham, noted that women‘s retirement security requires special attention.

“Our study showed that female retirees are more vulnerable because they often start with lower balances and lower ongoing benefits. This puts greater pressure on their portfolios and increases the risk of running out of money,” Associate Professor Pham said.