How Women Are Different from Men, Financially Speaking

womandifference
We all know men and women are different in some fundamental ways. But is this true when it comes to financial planning? In a word, yes. In the financial world, women often find themselves in very different circumstances than their male counterparts.

Everyone wants financial security. Yet women often face financial headwinds that can affect their ability to achieve it. The good news is that women today have never been in a better position to achieve financial security for themselves and their families.

More women than ever are successful professionals, business owners, entrepreneurs, and knowledgeable investors. Their economic clout is growing, and women’s impact on the traditional workplace is still unfolding positively as women earn college and graduate degrees in record numbers.

Some Key Differences

On the path to financial security, it’s important for women to understand what they might be up against, financially speaking:

Women have longer life expectancies.

Women live an average of 4.9 years longer than men. A longer life expectancy presents several financial challenges for women:

  • Women will need to stretch their retirement dollars further.
  • Women are more likely to need some type of long-term care, and may have to face some of their health-care needs alone.
  • Married women are likely to outlive their husbands, which means they could have ultimate responsibility for disposition of the marital estate.
According to the Bureau of Labor Statistics, within most occupational categories, women who work full-time, year-round, earn only 81% (on average) of what men earn. This wage gap can significantly impact women’s overall savings, social security retirement benefits, and pensions.

The dilemma is that while women generally earn less than men, they need those dollars to last longer due to a longer life expectancy. With smaller financial cushions, women are more vulnerable to unexpected economic obstacles, such as a job loss, divorce, or single parenthood. And according to U.S. Census Bureau statistics, women are more likely than men to be living in poverty throughout their lives.

Women are much more likely than men to take time out of their careers to raise children and/or care for aging parents. Sometimes this is by choice. But by moving in and out of the workforce, women face several significant financial implications:

  • Lost income, employer-provided health insurance, and retirement benefits.
  • Less overall savings
  • A potentially lower Social Security retirement benefit
  • Possibly a tougher time finding a job, or a comparable job (in terms of pay and benefits), when reentering the workforce
  • Increased vulnerability in the event of divorce or death of a spouse In addition to stepping out of the workforce more frequently to care for others, women are more likely to try to balance work and family by working part-time, which results in less income, and by requesting flexible work schedules can impact their career advancement.
Whether through choice, divorce, or death of a spouse, more women are living on their own. This means they’ll need to take sole responsibility for protecting their income and making financial decisions.
Whether they’re saving for a home, college, retirement, or a trip around the world, women need their money to work hard for them. Sometimes women tend to be more conservative investors than men, which means their savings might not be on track to meet their financial goals.
As women continue to earn money, become the main breadwinners for their families, and run their own businesses, it’s vital that they take steps to protect their assets, both personal and business. Without an asset protection plan, a woman’s wealth is vulnerable to taxes, lawsuits, accidents, and other financial risks that are part of everyday life. But women may be too busy handling their day-to-day responsibilities to take the time to implement an appropriate plan.

Steps women can take

In the past, women may have taken a less active role in household financial decision making. But, for many, those days are over. Today, women have more financial responsibility for themselves and their families. So it’s critical that women know how to save, invest, and plan for the future. Here are some things women can do:

Create a budget, manage debt and credit wisely, set and prioritize financial goals, and implement a savings and investment strategy to meet those goals.
Learn basic investing concepts, such as asset classes, risk tolerance, diversification, inflation, and the role of various financial vehicles like 401(k)s, 403(b)s and IRAs. Look for opportunities in the purchasing decisions you make every day. Have patience, be willing to ask questions, admit mistakes, and seek help when necessary.
Save as much as you can for retirement. Estimate how much money you’ll need in retirement, and how much you can expect from your savings, Social Security, and/or an employer pension. Understand how your Social Security benefit amount will change depending on the age you retire, and also how years spent out of the workforce might affect the amount you receive. At retirement, make sure you understand your retirement plan distribution options, and review your portfolio regularly. Also, factor the cost of health care (including long-term care) into your retirement planning, and understand the basic rules of Medicare.
If you have children and work outside the home, investigate and negotiate flexible work arrangements that may allow you to keep working, and make sure your spouse is equally invested in household and child-related responsibilities. If you stay at home
to care for children, keep your skills up-to-date to the extent possible in case you return to the workforce, and stay involved in household financial decision making. If you’re caring for aging parents, ask adult siblings or family members for help, and seek outside services and support groups that can offer you a respite and help you cope with stress.
Identify potential risk exposure and implement strategies to reduce that exposure. For example, life and disability insurance is vital to protect your ability to earn an income and/or care for your family in the event of disability or death. In some cases, more sophisticated strategies, such as other legal entities or trusts, may be needed.
To ensure that your personal and financial wishes will be carried out in the event of your incapacity or death, consider executing basic estate planning documents, such as a will, trust, durable power of attorney and health-care proxy.
Women are the key to their own financial futures–it’s critical that women educate themselves about finances and be able to make financial decisions. Yet the world of financial planning isn’t always easy or convenient. In many cases, women can benefit greatly from working with a financial advisor who can help them understand their options and implement plans designed to provide women with financially secure lives.
At Kline’s Investment Services, we specialize in women investors because we understand their unique financial challenges. We help women put in place a financial plan that’s not only easy to follow, but helps women obtain a healthier financial life. For more information, please call us at (330) 673-2988

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Disclosure:

Securities America and its representatives do not provide tax or legal advice. Tax-law is subject to frequent change; therefore it is important to coordinate with your tax advisor for the latest IRS rulings and specific tax advice, prior to undertaking an investment plan. Any tax or legal information provided here is merely a summary of our understanding and interpretation of some of the current income tax regulations and is not exhaustive. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation.

Diversification can be thought of as spreading your investment dollars into various asset classes to add balance to your portfolio. Although it doesn’t guarantee a profit, it may be able to reduce the volatility of your portfolio.