Financial Advisors in Raleigh NC: Women & Wealth

Financial planning can present unique challenges for women that differ from those faced by men. For instance, women typically earn less than men on average and are more likely to work part-time or take career breaks to care for their families. These interruptions and lower lifetime earnings contribute to distinctive financial planning obstacles that women must navigate to meet their financial goals.

Less Income Means Less Savings

It is no secret that women are frequently paid less than men for comparable roles. However, other pay disparities also exist, particularly for women of color and those who are mothers. When women earn lower salaries, this disadvantage accumulates over time, especially concerning retirement savings. This is because most individuals set aside a portion of their income from each paycheck for retirement, and a lower income translates to a smaller amount saved.

If you're making less, then the total amount you're putting into your retirement is lower. Not only is the contribution amount potentially lower, but it is also likely to impact the potential for compounding growth.

If possible, save more for retirement; even 1%–2% more each month can make a difference. However, that it's not the percentage that matters as much as making sure you have enough for retirement. So, talk to a financial professional about having a plan and tracking toward it.

Caregiving

Women, in general, tend to take on more of the caregiving for others than men do. This can include caring for children, aging parents, spouses, and grandkids. This work usually isn’t compensated and can mean women aren’t able to participate fully in the workforce. 

Taking a break from the workforce to care for a loved one or switching to part-time work can result in several financial setbacks. These may include a loss of salary and wages, reduced retirement savings with limited potential for growth, diminished Social Security benefits, fewer opportunities to save for healthcare expenses, and a decrease in bonuses and raises, among other factors.

If you leave the workforce, try to keep saving for retirement—you might be eligible to use a spousal IRA (if you're married) or a traditional or Roth IRA (if you have earned income, even if it's part time). If you aren't eligible for a retirement account, consider investing in a nonretirement account.

Longer Life Span

Generally, women have a longer life expectancy of five years compared to men. Furthermore, 81% of individuals who are 85 years or older are female, which implies that women are more probable to be alone in their retirement and bear the responsibility of their financial well-being. This longevity factor can also affect various aspects of retirement, such as increased healthcare expenses, the requirement for a larger Social Security benefit, and the duration for which one's savings must suffice to meet living expenses.

Consulting with a financial advisor or financial planner can be beneficial. They can help make sure your retirement plan is suitable for a long retirement. They can provide you with an understanding of whether your current savings are adequate. Moreover, it is beneficial to contemplate supplementary measures to safeguard yourself, including acquiring long-term care insurance or guaranteed income.

Healthcare Costs

A significant number of individuals fail to factor in healthcare expenses when saving for retirement and are unaware that women typically require a higher amount. Women are more prone to needing round-the-clock care, such as a nursing home or assisted living. This type of care can cost up to six figures annually.

To prepare for healthcare costs during retirement, it is recommended to set aside additional savings specifically for this purpose. For those with an HSA-eligible health plan, a health savings account (HSA) can be a useful tool. HSAs allow contributions to be split between long-term savings for healthcare expenses in retirement and immediate cash withdrawals for current medical expenses.

Contributions to an HSA offer three tax advantages, including an initial tax deduction, tax-free earnings potential, and tax-free withdrawals for qualified medical expenses. If you are not eligible for an HSA, you can increase your savings by contributing more to a 401(k)/403(b) or opening an additional IRA account.

There are specific contribution limits and rules that apply to these types of accounts. A financial advisor or financial planner help with this by advising you as to which account is best meets your financial situation and goals.

Social Security

Statistics show that women are more likely to receive lower Social Security benefits, often due to the pay gap and caregiving responsibilities. Social Security benefits are calculated based on the top 35 years of income. So, if you earn less, your Social Security benefit will also be less. This is compounded by the fact that women often retire earlier and live longer than men, resulting in a longer period of time with less money.

To maximize your Social Security benefits, consider delaying your retirement until your full retirement age. Or even better, until age 70, which can increase your annual benefit. Consider having the higher-earning spouse wait as long as possible to retire, if married.

If you are divorced and were married for at least 10 years and haven't remarried, you may be eligible to receive your ex-spouse's benefit if it's greater than yours. The rules regarding Social Security benefits can be complex, so it's recommended that you seek the guidance of a financial professional.

Bottom Line

Women face different and unique challenges when it comes to financial planning. Therefore, it is essential for women to be proactive in their financial planning by seeking out resources and education. As well as advocating for themselves in the workplace and in financial decision-making.

Sources:

https://genderdata.worldbank.org/data-stories/financial-inclusion/

https://www.fidelity.com/learning-center/personal-finance/gender-gap-retirement

https://money.usnews.com/money/retirement/articles/how-the-gender-pay-gap-affects-womens-retirement

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This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.