Today’s female population is more educated and accomplished than ever before. By 2020, women are expected to control 2/3 of private wealth.¹ That being said, when it comes to long-term, personal financial planning, women are often still giving up their seat at the table.
Many women are comfortable handling the day-to-day management of their households, but end up deferring to a partner when it comes to long-term financial planning. 70% of women over 75 are divorced, widowed, or never married.² This increases the
likelihood that women will find themselves in a situation where they need to make long-term financial decisions, which can feel overwhelming.
The good news is that women are often naturally strong planners. We plan everything from our children’s activity schedules and family vacations, to our business or personal goals. Thinking about the long-term consequences of decisions and how different puzzle pieces come together is typically an area where women excel.
That skillset is exactly what’s needed for long-term financial planning. Let’s talk about the financial puzzle pieces that women should be speaking to an advisor about.
Caregiving is good for the soul but hard on the wallet
Whether it is taking care of children or taking care of aging parents, caregiving often falls on the shoulders of women. Taking time off to care for family can have a significant impact on your finances. Leaving the workforce can mean lost promotions
or pay raises, less time saving into a 401(k) and receiving an employer match, and fewer years contributing to Social Security. The cumulative financial impact of leaving the workforce to raise children can reach upward of $500k³ and, on top
of that, an additional $300k if you care for aging parents.⁴ The unfortunate result is that women are 2.5 times more likely to live in poverty and 5 times more likely to depend on Social Security in retirement.²
We live longer and require more care
Roughly 70–75% of assisted living and nursing home residents are women!² Women are also twice as likely be disabled at some point in their life, and their care need will likely last 3 or more years.² And because we’re living longer,
we often act as caregivers and then end up needing professional care ourselves.
Living longer also creates other challenges to consider and be prepared for. Retirement is more expensive because we have more years to pay for. It also means that if you’re married, you are likely see your income reduced due to the loss of pension income and the lower Social Security check after the passing of your spouse.
Risk is not really our thing
Studies show that when it comes to investing, women tend to prefer less risk.⁵ That may seem like a good thing since taking less risk means not experiencing as many ups and downs in the market. However, considering we often have less time in the workforce
to earn income and save, live longer lives, and require more care, investing more conservatively makes our other retirement risks more challenging. Our money needs to be managed in a way that will allow it to withstand our own longevity!
Six things you can do now:
Don’t wait! Time is more valuable than money
Starting as early as possible saving toward your financial goals can be more valuable than waiting and trying to save a lot to catch up.
Complete a financial plan
A financial plan addresses your specific needs and goals which is something that can be much easier to talk about. Your portfolio and asset allocation is important, but whether or not that’s going to allow you to retire, take those trips you’ve been dreaming about, or see your grandchildren regularly may be more enjoyable to talk about. Walking through your financial plan can help simplify some of the complexities associated with financial jargon. Be sure to ask questions about anything that doesn’t make sense. Your advisor is there to make you confident in your decisions, not to cause confusion.
Talk to your advisor about the best way to take any pension or Social Security income
Deferring Social Security can increase that income for the rest of your life. That can be a significant help, especially if longevity runs in your family. You should also ask about your eligibility to collect additional benefits, depending on whether you have been divorced or widowed.
Ask about what options make sense for you to cover long-term care costs
Many long-term care products offer additional benefits that provide resources to your family to help obtain the best care. There are some policies that will even provide income to a family member providing care, to help ensure that the time spent providing care does not jeopardize their financial future.
See if your family should have life insurance to cover the loss of Social Security or pension income in retirement
Many people don’t think life insurance is needed in retirement. However, it can be extremely valuable if longevity runs in your family and losing income becomes a risk you may face.
Talk to your advisor about concerns you have over market volatility and consult with them when the market gets crazy
The reality is that your plan may suggest that you invest in a diversified portfolio that is a little more aggressive than you’re naturally comfortable with. Your advisor can help coach you and put market downturns into perspective. As long as your immediate income needs are covered, your investments should be managed in a way that is appropriate for your long-term goals. Unless your goals or their timeframe changes, how you’re invested likely doesn’t need to.
Take the next step.
If joining multiple meetings with your advisor during the year seems daunting, select one meeting per year or one topic per meeting. Trust in your advisor knowing that they have helped many others through understanding their finances and answering all
of your questions before, regardless of how simple they may seem to you. Embrace the empowerment and freeing experience of taking control of your finances. Contact us today to take your first step!
This is for informative purposes only and in no event should be construed as a representation by us or as an offer to sell, or solicitation of an offer to buy any securities. The factual information given herein is taken from sources that we believe to be reliable, but is not guaranteed by us as to accuracy or completeness. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. Past performance is not indicative of future results. Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within.