There was a time when men handled all of a family’s financial affairs. However, many of today’s women earn their own money and take care of their own finances. Despite being financially savvy, women may also face unique challenges.
Whether you’re single or with a partner, have children, or are starting to plan for your retirement, knowing what to watch out for will help you take control of your financial future. Here’s a closer look at four important financial roadblocks women face.
Research shows that, on average, women live longer than men. While losing a partner is heart-wrenching, the pain is even worse if the woman is not financially prepared. It’s common for widows to suddenly find themselves having to make major decisions without the knowledge and information they need. Not only can this leave you feeling confused and overwhelmed, but may also lead to costly mistakes.
2. Wage Disparity
While wage disparity has improved, the truth is, women still generally earn less than men. Not only do they often receive smaller paychecks, but they’re also more likely to take time off from work to raise a family or care for aging parents. This can lead to lower lifetime earnings and a smaller retirement nest egg.
3. Risk Aversion
Research from Fidelity Investments shows that women often choose a more conservative investment strategy than their male counterparts. Investing too conservatively or opting to save rather than invest can significantly lower the amount of money you have to work with when you’re ready to retire.
4. Impact of Divorce
Going through a divorce is emotionally painful. However, switching to a single income also has a significant impact on a woman’s finances. Research shows that divorced women typically experience a 27% drop in their standard of living after a divorce.1 This may be due, in part, to the financial responsibilities that come with a single person being the primary caregiver for their children.
Smart Investment Tips for Women
While it may not be possible to avoid some of the challenges listed above, planning ahead can help minimize the financial impact. The following five tips will help you take control of your financial future.
1. Stay Involved in Financial Decision-Making
For married women or those in a partnership, it’s important that both partners take an equally active role in financial decision-making. This will help ensure you’re not left in the lurch when it’s time to make important decisions on your own.
2. Plan for a Long Life Expectancy
Since you’re likely to have a longer life expectancy, it’s important to choose an investment strategy that will help ensure you don’t run out of money. This requires a portfolio that's designed to take on the right amount of risk and offer a sustainable withdrawal rate while also combatting inflation.
3. Consider Healthcare Expenses
The cost of long-term care is another concern women investors need to consider. Depending on the level of care you need, this can range from approximately $48,000 to over $100,000 per year.
Since this is a major expense that's also unpredictable, it’s important to include the possibility in your financial plan. This will allow you to put protections in place to help ensure you can take care of your medical needs without negatively impacting your retirement lifestyle.
4. Avoid Making Decisions Out of Fear
When the markets hit a rough patch, both men and women feel the temptation to make drastic moves. However, if you have a suitable investment plan in place, it should be poised to handle both positive and negative market environments.
Giving in to either fear or exuberance can lead to costly mistakes. Avoid emotional reactions. Instead, choose a carefully designed investment plan and then trust the process.
5. Seek Professional Guidance
Receiving guidance and advice from a professional can have a major impact on your ability to retire the way you want. By taking the time to hire a financial advisor you trust, you’ll have more confidence to overcome the odds that may be stacked against you.
At Bangerter Financial Services, we serve as a resource to our clients and their families. If you would like to schedule a complimentary consultation, please reach out to us. We look forward to helping you build the financial future you envision.
1 “Making Sense of Your Money After Divorce.” Ellevest, 2019.
This is for informational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. Investors should view the guide for more important information, such as risks involved. Investment advisory services offered through Bangerter Financial Services, Inc. A state Registered Investment Advisor. Registered Representative and securities offered through Concorde Investment Services, Inc. (CIS), member FINRA/SIPC. Bangerter Financial Services, Inc. is independent of CIS.