Financial Planning For Women
Financial planning for women is important. In the following guide, we are going to review seven of the important facts about women and financial planning that you should know.
Chapter 1
Family Responsibility
Many women take more time off from work to raise children or care for parents. This can mean time off from a career, slowing their progress in advancements, raises and promotions. It can mean prioritizing flexible schedules over high-paying positions. Many women only weigh the loss of a paycheck when deciding to take time to care for family, but there are other costs, such as the loss in income to save and invest, as well as a decrease in Social Security benefits.
Often flexible or part time work needed to care for family means jobs with little or no benefits. People are more likely to contribute to retirement if their employer offers a retirement plan. If woman are not eligible to participate in a retirement plan through work or do not have one, they have to be more proactive in setting up and saving for their retirement. There may be other financial benefits missing, like HSAs, financial wellness education programs, and employer subsidized health insurance.
For all of these reasons, there can be jumps in the wealth accumulation journey for women. That is precisely why financial planning for women is of critical importance – proper planning can be done to account for time off from formal work. Through savings and budgeting strategies, you can make wiser decisions when money is less than it usually is.
Retirement Checkpoints: Age Milestones You Don’t Want to Forget
Chapter 2
Divorce
Divorce can be a hard financial pill for a woman to swallow.
In many divorce settlements, women tend to bear the larger part of raising children. This can mean deciding to take the house instead of the 401(k) in a settlement so that the children can stay in their schools and home. As financial advisors for women, we usually find that in most cases a home is less of a growth asset than a 401(k) – and has property tax and maintenance expenses that come with it! Unfortunately this results in many women having a less robust financial portfolio down the road. Add the fact that being the caregiver can result in lower income and less career advancement, and women can potentially wind up with much lower retirement savings down the road.
Many couples are making retirement plans together. Yet a large percentage of first-time marriages end in divorce, splitting the retirement assets and hurting the finances for both spouses. Women are often hit harder. On average, a woman’s income fell by 41 percent after divorce.
As with many ailments, the best cure is prevention. Financial planning for women during marriage is of high importance, as it can help mitigate the impact of any financial fallout from a divorce, should it occur, later on. Divorce is a time of transition, and when it is appropriate, there is the opportunity to create something new and redefine your goals. During times of transition such as these, creating a strong financial plan is an important part of recreating and building your new life.
Chapter 3
Cost of Living
Here’s a little known fact about women and money: the lifestyle of a woman often costs more!
A gender pricing study by the NYC Department of Consumer Affairs found that, on average and across certain industries, women’s products were 7% more expensive than men’s (CNBC, 2015).
And because they statistically live longer, women will usually experience high healthcare costs. For all of these reasons, women’s financial planning is vital.
Chapter 4
Gender Investment Gap
According to the Fidelity 2021 Women and Investing Study, women and investing is on the rise, with 67% of women directing their funds into investments that are additional to their retirement savings. This is great progress, but still not enough.
Yet, according to the same study, still only 1/3 of women would deem themselves, “investors”, with only 19% feeling confident selecting investments to meet their goals.
The solutions are education and guidance.
- 77% of women would feel more confident if they had a financial advisor
- 71% of women felt more confident having set up a financial plan
Here are some ways we can solve the gender investment gap.
- Start saving, planning, and investing early, even if it’s just through your 401k at work.
- Follow blogs on women’s financial planning or investing tips for women.
- Talk to a female financial advisor, one who is focused on financial planning for women.
What a Job Change Means to Your 401(k): Financial Advisor in Utah Gives 4 Examples
Chapter 5
Gender Pay Gap
The pay gap between men and women partially results from things already mentioned above, but there are plenty of other inputs as well. And there are things women can do to help themselves.
Studies show that women often need a tap on the shoulder to go for that promotion, that elected office or that pay raise. Being aware of this and finding a support group or a mentor to point out when you should be asking for the raise or pushing your business to the next level can really help you fast-track your personal career development.
Chapter 6
Death of a Spouse
Women often outlive men. No matter who might live longer, it is important to have a good estate plan and make sure both spouses are properly educated and involved in the family finances. Losing a spouse is an emotional time, and proper planning can keep the finances from being an extra worry and stress.
Women and financial planning – key points about losing a spouse
No matter who the primary bread winner is (or if both spouses contribute to the household income), proper life insurance is key. This is not insurance for you, but it is for the people you love most to make sure they are taken care of. Do not leave those numbers up to guessing!
- For women who are primarily responsible for family caregiving, they may have taken time away from their careers. On average, women take 12 years out of their careers to care for family, and that can result in lower incomes. A married woman’s financial plan should include making sure to have the right amount of insurance for the spouse.
- Also, women who do not work outside the home should still have life insurance. The cost to replace all that she does in the home – food preparation, childcare, cleaning, transportation, etc. – should be valued and will need to be replaced if something should happen.
- Have the proper legal documents in place. Items like a will, trust, and power of attorney. And importantly make sure you follow through on funding the trust.
- Long-term-care insurance should be seriously considered, as women live longer with health problems and often outlive a spouse. They take care of their husband, but then no one is there to take care of them.
- If your spouse owns a business, don’t wait for the person’s passing to be ready to deal with the financial ramifications of losing a spouse who owns a business. Get a handle of all aspects of the business ahead of time, from its finances to legal structure, its valuation, and the key parties involved.
- Consider having a financial advisor. Regular meetings with an advisor can make sure both spouses are on the same page with their finances and both are educated on what is going on. After the death of a spouse an advisor knows the financial plan and can continue to be a financial partner for a surviving spouse. For women, a financial advisor can help them step into the role of managing all of the family finances after a death, during a time of grief and stress. The Fidelity study shows that most women are confident with budgeting and day to day finances, but are much less confident and involved with long term finances and investing.
Inheritances: 7 Real-Life Scenarios and 7 Rookie Mistakes
What this Financial Advisor in Utah Wants Every Woman to Know About Estate Planning
The complete guide to losing a spouse who owns a business
Charitable strategies for reducing tax impact when selling a business
Chapter 7
Financial Education
Talking about money, numbers and stock market results may not always be exciting, but it is a reality of life. Find a specialized financial advisor for women who can sort out what is important can make financial education much less painful. It may even become enjoyable when talked about in terms of life and goals.
Remember that not all financial advice is quality advice! It is important to find a trusted financial advisor who acts as a fiduciary. A fiduciary is required to act in their client’s best interest.
In addition to looking for a fiduciary, make sure you work with a financial advisor who focuses on financial planning rather just a transactional relationship. A transactional relationship tends to be focused on investment products. A financial plan tends to be focused on your goals and needs, looking at your whole comprehensive picture.
At Rock House Financial, we have team members who are designated financial advisors for women, who specialize in helping women navigate the financial transitions they face in life.
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Sources
King, Brittany. (13 January, 2022). US Census Bureau. Those Who Married Once More Likely Than Others to Have Retirement Savings. Retrieved from here.
Ellevest. (2018, November 8th). What Women Can Do About Divorce Inequality. Retrieved from here.
Elyatt, Holly. (2015, December 23rd). CNBC. Being a woman costs more than being a man: Study. Retrieved from here.
Fidelity Investments. 2021 Women and Investing Study. Retrieved from here.
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