Women juggle many roles from career professional to family caretaker. Another role that they will likely take on in the future if they haven’t already—financial decision-maker.
As women work to build and preserve wealth, they face some unique challenges that can significantly affect their savings over time. Let’s look at a few of those along with wealth planning strategies to help overcome them.
Living Longer Than Men
Women are currently outliving men by nearly six years.1 Living longer, of course, means their retirement savings have to stretch further. To complicate things a little more, in their later years, they could experience mounting healthcare costs. A 65-year-old has almost a 70% chance of needing some form of long-term care over the course of their life.2 It’s better to plan ahead for this possibility today, setting money aside or using insurance strategically to help fund long-term care.
Facing a Wage Gap
An earnings gap is another longstanding challenge for women. Among those with full-time, year-round jobs in 2021, women were paid 84 cents for every dollar paid to a male counterpart.3 That adds up to a multi-thousand-dollar gap each year, which can present an obstacle to long-term savings, investment and wealth creation.
Being Out of the Workforce
When it comes to caring for loved ones of all ages, women are usually the ones who step up. Two-thirds of caregivers are female, according to the Centers for Disease Control.4 A recent study found that 27% of women between the ages of 18 and 35 planned to support a family member in need within the next six months.5
The earnings pauses required to provide that care can add up dramatically. For example, losing a year of work income at age 35 typically results in a more than $100,000 loss in retirement savings.6 And years lost from the workforce impact a woman’s monthly Social Security benefit, which is partially based on her top 35 earnings years.
Assessing Your Finances
Even if you find yourself playing catch-up in terms of wealth planning, a wealth advisor can work with you to access where you are today and where you hope to be in the future. If you’re married and your partner is more involved in financial planning than you are, consider joining him when he meets with a wealth advisor. Since there’s a strong likelihood that you’ll eventually be in charge of your finances, make sure you know practical information like passwords for key financial accounts.
Strategies for Success
Based on your situation, your advisor may recommend setting aside more savings to cover longevity, possible healthcare needs and more. For wealthier clients, this may simply amount to a reallocation of resources. For others, it could necessitate steps like saving more, working a few extra years, making retirement account catch-up contributions and delaying claiming Social Security to maximize your monthly benefit. By waiting until age 70 to claim Social Security, you can gain 8% more in benefits each year following your full retirement age. Regardless of your wealth level, it’s highly advisable to maximize your employer’s match in workplace retirement plans such as 401(k)s.
Women’s Investing Edge
One advantage women may have in preparing for their financial future is their investing acumen. Perhaps because they are more patient and take a longer-term view,7 female investors in one study outperformed men by .4% on average over a 10-year period.8 Women also tend to invest differently from men in terms of aligning their investments with their values. Of those who are primary financial decision-makers in their households, 66% own investments that have been vetted for environmental, social and governance factors.9
Seize the Day
To reach their full financial potential, women, like men, should be proactive in creating a wealth plan that reflects their needs and updating it along the way. Fidelity Investments recently found that more than one-third of women age 36 and above regret waiting too long to start saving for retirement.10 Whether you’ve always been the sole financial decision-maker or have relied on a spouse or partner to manage the finances, it’s never too early to jump in, get educated, create a plan and secure your future. Your AdvicePeriod wealth advisor is here to help.
1 Life Expectancy in the U.S. Dropped for the Second Year in a Row in 2021
2 How Much Care Will You Need?
3 America’s Women and the Wage Gap
4 Women, Caregiving and COVID-19
5 Fidelity’s 2022 Money Moves Study
6 Get help making the most of your money—and life
7 Women get better returns on their investments than men—here’s why
8 Fidelity Investments 2021 Women and Investing Study – Analysis of the investing behavior of retail customers, comparing the annualized return of assets of 5.2 million self-directed retail accounts from Jan 2011 – Dec 2020.
9 UBS Own Your Worth: Women are acting on their convictions to pursue greater purpose in their lives
10,11 Fidelity’s 2022 Money Moves Study
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