Planning from a Woman’s Perspective
I’ve attended my share of wealth management conferences and it’s not uncommon to have a respected speaker deliver a message on establishing a niche market, including financial planning for women. According to the U.S. Census Bureau, just over half of the U.S. workforce is female. That’s a pretty big niche. However, many in the financial industry look past women or omit them from the planning process. That’s unfortunate, as women have some unique planning needs.
The Income Gap
It’s widely known that women, unfortunately, make less than their male counterparts in the same role. But this is even more pronounced when race is factored in. The National Partnership for Women and Families reports that as of 2018, white women make 77₵ for every dollar made by their male counterpart. Black American women make 61₵ and Hispanic woman earn just 53₵ respectively, compared to the dollar earned by men.
Women Live Longer
While many focus on a premature death, “What if you tragically live?” Americans are living longer – and some are living much longer. Mortality tables from the Society of Actuaries indicate that a male in his mid-50s today has a 1-in-3 chance of living to age 90; for women, that increases to 1-in-2. And for couples, there’s a 44% likelihood that a woman outlives her husband by five or more years, and a 1-in-5 chance she outlives him by 15 or more years. Will your retirement income be enough for this possibility? What if you tragically live?
Women May Lack Confidence
Recent behavioral science studies indicate that while many may feel confident managing their day-to-day finances such as budgeting or balancing a checkbook, women may lack confidence when it comes to planning for their retirement and selecting investments. Add on the income gap to this lack of confidence plus the fact that women tend to live longer than men and, thus, need more funds for retirement due to longevity, and you develop a dangerous brew.
Your considerations may also change if there are no heirs or family members interested in maintaining your business operation. A number of factors come into play, including your desire for retirement, income, care in infirmity and tax planning.
4 Considerations for Women and Their Finances
- Set Goals
Whether it’s for a down payment on a home, a vacation, a college education, or retirement, knowing what you want to achieve can help make the most of the money you’re investing. It doesn’t hurt to have a physical picture as well as a mental one. Behavioral science tells us we’re more likely to achieve that which we see.
- Understand Your Risk Tolerance
Many financial firms offer a series of questions to help determine your tolerance for risk and can guide you towards an appropriate mix of investments. These can help give you confidence to know if your portfolio is pointing in the right direction.
- Save Early, Save Often
An old proverb states that the best time to plant a tree is twenty years ago; the second-best time is now. Regardless of where you are now, start saving – even if it’s a small amount. Increase that amount in small increments over time. You’re more likely to stick with these life changes if you take them in small amounts and build it into your cash flow.
- Seek a Financial Professional
Most successful investors rarely go it alone. It’s ok to have a trusted guide to help you accomplish your important life goals. Make sure they’re competent and that you feel comfortable talking about your financial goals and concerns. Check out credentials and backgrounds at state websites and brokercheck.finra.org. Be firm and set your expectations about service, planning, and ongoing reviews. The more candid you are up front, the better it will be for the professional to build a trusted relationship.
Joe Buhrmann is a Certified Financial Planner™ and is Manager of Financial Planning Support for COUNTRY Financial.