According to a study by the National Center for Women and Retirement, nine out of 10 women will be solely responsible for their finances at some point in their lifetime. This is a reality that I know myself and my partners at Blue Stone are happy to guide our clients along this sometimes daunting path. Women living in affluence may feel at ease with the resources they will have in retirement. However, this ease may lend a false sense of security if it is not understood that wealth must be strategically managed to last a lifetime.
Three life trends impact the retirement planning strategies of women:
- Earning power. Women continue to earn less money than men – 81.1% of the median weekly earnings for men working fulltime – and many have worked fewer years because they’ve raised a family.1
- Life expectancy. A 65-year-old woman is likely to live another 20.5 years,2 and older women (65+) outnumber older men at 25.1 million versus 19.6 million.3
- Roles. Women are often nurturers who focus on taking care of others. They may not think about financial planning to help meet their own retirement needs.
To be confident you can afford to retire and live the life you imagined, it is important to understand your core living expenses, your retirement income stream and the projected costs of anticipated travel, hobbies or purchases. The following are some financial planning tips that can help women solidify their futures, while taking into consideration the impact of their marital status.
I hope these tips can help you and your family understand where you currently stand and how to best move forward with your financial plan. We are here to help, please reach out to me directly with any questions at [email protected].
Strategies to Solidify Your Financial Plan
Living within your means and paying off your debt (including your mortgage) lets you maximize your savings and preserve your assets. To achieve this, the first step is to review your budget. If you do not have one, create one based on expenses, income and goals. You can then create a systematic savings plan, which includes saving for emergencies, as well as planning for future needs such as health care and long-term care. Remember to pay yourself first, which means funding savings and investing goals first, and living on the remainder.
Considerations for Married Women
While entering into a marriage does not necessitate a merger of finances, by creating a financial plan as a couple you can ensure that you both agree to your strategies for saving and investing, and understand the impact of lifestyle decisions. An open discussion about attitudes toward money, spending habits, goals and liabilities will help you determine the best way to manage your expenses.
Some couples merge their assets after meeting individual liabilities. Others opt to have separate bank and investment accounts, but contribute to a joint household account. However you choose to fund your life together, seek advice for comprehensive retirement planning. You may be best served by making your retirement investments and plans compatible and diversified, even if you keep them separate. Additionally, discussing titles to property and accounts can help ease access or transfer ownership when one spouse passes.
If your financial plan is based on two-income earnings, it is important to discuss the contingency plan for your retirement income stream, should there be a loss of one income. For instance, purchasing life insurance helps a surviving spouse maintain their income stream, or pay off debt such as a mortgage.
It is also important to discuss your options for drawing income from a defined-benefit plan upon retirement. The distribution choice you elect could impact the income stream for the surviving spouse. For example, drawing less income per month may provide an important income stream throughout both of your lives.
The Impact of Divorce
The end of a marriage has a significant impact on your finances. In a report published by the United States Census Bureau, women who divorced in the past 12 months reported less household income than recently divorced men, and women who divorced in the past 12 months were more likely than recently divorced men to be in poverty (22 percent compared with 11 percent)4 . Working with financial specialists during a divorce settlement, including your financial planner, tax professional and estate planning attorney, can help you reassess your financial worth to adjust your plans, if necessary, and reassign beneficiary designations.
Other life changes, such as the birth of a child or grandchild, also provide an opportunity to talk with your financial planner about your retirement plans. Outside of life events, scheduling annual reviews of your portfolio can help ensure your financial plan stays in line with inflation, market changes, new tax laws and your personal goals.
Women have always been a strong backbone in our families and they are now sometimes the sole financial providers. I want to make sure that they have the tools and resources they need to succeed and have a happy retirement.
Contact me today to set up a meeting to discuss your financial and retirement goals.
1 Institute for Women’s Policy Research, “The Gender Wage Gap by Occupation,” April 2016, http://iwpr.org/publications/pubs/the-gender- wage-gap- by-occupation- 2015-and- by-race- and-ethnicity.
2 “Health, United States, 2015, Table 15,” National Center for Health Statistics, CDC; http://www.cdc.gov/nchs/data/hus/hus15.pdf#appendixes.
3 “The Older Population,” 2014, Administration on Aging, http://aoa.acl.gov/aging_statistics/profile/2014/3.aspx.
4 “Marital Events of Americans: 2009,” United States Census Bureau, August 2011, http://www.census.gov/newsroom/releases/archives/marital_status_living_arrangements/cb11-144.html