“Women’s financial influence is stronger than ever. They control roughly two-thirds of annual spending in the U.S. and 75% of women feel responsible for day-to-day household spending,” according to BNY Mellon’s Pershing’s study “Women: Investing With a Purpose.” However, the report goes on to emphasize, “Women face unique challenges that men do not—statistically they live longer, earn less, have fewer savings, and incur higher medical costs. There is a troubling disconnect between these future realities and many women’s current investment risk posture.”

This reality reinforces the urgent need for women of all ages to prioritize retirement saving and investing. The earlier you start, the longer you’ll have to take advantage of compounding and benefit from planning for what should be some of the best years of your life.

Continuing our series “Women & Investing: Financial Literacy, Independence & Parity” in honor of Women’s History Month and International Women’s Day (March 8, 2021), let’s further the conversation with a look at how women can better understand and begin to remedy the unique financial challenges they face through various life stages.

“Adulting” (~20s to Early 30s)

This is an exciting time for young women—graduating from college, moving away from home, embarking on the first steps of a career, loosening the financial attachment to parents and experiencing real freedom for the first time. But with that freedom also comes new-found responsibilities. You may have to start paying off student loans and/or completely paying for all of your living expenses. While there’s lots of fun to be had, you want to make sure you can manage all of those obligations while starting to plan for the future.

At this time in life, it can be difficult to think about long-term obligations—like marriage, children, purchasing real estate or the distant glimmer of retirement—especially when you’re just starting out in the working world and living on your own for the first time. There’s a whole world of possibilities awaiting you, but one of the best things a woman in her 20s can do is to start educating herself on investing and financial planning. This is really the ideal time to set a strong financial foundation for yourself.

In order to set yourself up for a strong financial foundation, start learning about money management, finances, debt and investing. There are loads of books and online resources available to help you get started, but it may also make sense to speak with a professional wealth manager to make sure you’re on the right track. Set your financial goals and create a budget to help achieve them. Especially once you start getting a steady paycheck deposited into your account, it can be all too easy to swipe, tap or click “buy now” without thinking. Allocating a specified amount for each area of spending (housing, clothing, food, entertainment, and savings) can help lessen the likelihood of overspending.

This is a great time to start building your credit, but you want to make sure you understand the difference between “good debt” (debt that is long-term investment and will benefit you, such as student loans and a mortgage) and “bad debt” (debt that is for short-term purchases like credit card debt). We want to try to avoid the bad kind.

Start Saving!

  • Set up an emergency fund, just in case.
  • Try to start saving for retirement. Many experts recommend around 10% (including employer contributions) at this stage of your life. It may seem like a lot to put aside for something that’s so far away, but the more you invest now, the better off you’ll be down the road!
  • Understand the importance and learn the art of negotiating your salary. In a book called Women Don’t Ask, as part of her research the author found 57% of men attempted to negotiate their salaries—while only about 7% of women did. Of those who negotiated, they were able to increase their salary by over 7%, which when compounded over the life of your career can end up being very significant! (See See Part 1 of “Women & Investing” for more wage-related data)

Adulthood (Early-to-Mid 30s to Early 40s)

At this stage of life, many women feel they are on a little more stable footing than in their 20s. Perhaps you’ve made advancements in your career, settled on where you want to live, maybe found a partner who you want to start a life with and maybe even started or planning for a family.

Because it’s likely not all about you anymore, financial considerations and needs should be adjusted accordingly. It may be time to reevaluate your finances and budget—increase contributions to retirement accounts and start seriously saving for the next life milestones: Including the possibility of marriage, property and children. Your allocations for nights out might now be going toward a new minivan!

Reduce the “bad debt” that we talked about earlier—any debts that are not helping you increase your net worth over the long-term, monitor your credit standing and actively work to improve your credit. You’ll also want to increase emergency fund savings. The safety net once offered by your parents is likely gone, and you may now be the one expected to make sure others are taken care of.

Danielle Gould, CRPC®,
Associate Wealth Manager

Increase retirement allocations to at least 15% and be sure to take advantage of any work-sponsored company matching. This is a great time to get more serious about investing beyond your retirement account. You may also want to review where your allocations are and evaluate your risk tolerance based on your new life circumstances. Noting the unique approaches men and women sometimes have towards money management, Danielle Gould, Chartered Retirement Planning Counselor?, an Associate Wealth Manager at Mayflower Advisors, comments, “In my experience, women tend to be more risk averse when it comes to financial life management.”

A frequent consideration at this life stage, the cost of raising children can vary greatly but here are some numbers that might give you an idea of what you might be looking at. According to the U.S. Department of Agriculture, in 2015, the estimated cost of raising a child born to middle-class parents from birth to the age of 17 was $233,000, not including college tuition.

In your 30s-40s, you’ll also want to give more serious thought to estate planning. As you start to accumulate assets and dependents, you want to make sure that you have your estate in order, including your will and other essential documents as we discussed in an earlier article.

Finally, this is a good opportunity to reevaluate your insurance coverage. As your assets increase so too should your insurance to make sure they’re covered. You also want to ensure that your loved ones will be taken care of in case something happens to you or your partner.

The Middle (Mid-40s to Mid-50s)

This stage in life can be interesting mishmash of all of life’s experiences—often particularly so for women. Some may have younger kids, adult children who are off to college or out of the nest completely—or even a mix of both. You may even start to welcome grandchildren!
There are also some unique challenges women in this age bracket may be dealing with, including the possibility of divorce, which can impact their financial situations: “Despite the common perception that women make out better than men in divorce proceedings, women who worked before, during, or after their marriages see a 20 percent decline in income when their marriages end” (The Divorce Gap).

In addition, frequently during this phase of life, women take on the responsibilities for aging parents. AARP reports that although men do more now to take care of the elderly and children, the average caregiver is a 49-year-old working woman.

While the responsibilities may be great, hopefully by your 50s, you’re well established in your career and the other pieces of your personal and financial life are somewhat sorted out. If you’ve not already done so, this is time when you want to start thinking seriously about planning for retirement even though it may be a number of years away and make sure that you’re protecting your financial well-being for both the short and long term.

Meet with a trusted financial advisor to start getting more specific about retirement and to make adjustments as needed. Danielle Gould, CRPC® emphasizes the benefit of being sure that both spouses/partners actively participate and contribute to these important conversations: “I find that a woman’s perspective in planning often leads to added scenario evaluations and further portfolio stress testing—resulting in increased integrity for the family’s financial plan.” You’ll also want to work with your tax professional to strategize tax planning as you’re likely approaching your peak earning years.

While addressing more standard budgetary needs, don’t forget to assess readiness for major life expenses—like education expenses, investing in a vacation property or taking care of aging parents.

If possible, develop an aggressive strategy for paying off any bad debt (see above) and increase contributions to your retirement accounts. Finally, it’s always advisable to regularly revisit your financial and estate plans and insurance coverage to be sure you, your assets and your dependents are protected for whatever curveballs life may toss your way.

Golden Girls (Mid-50s and Beyond)

Women often put others before themselves, and it’s no different when it comes to retirement. But after all your years of taking care of those around you this is the time to get ready to enjoy your retirement—whatever that might look like.

You’ll want to work closely with your trusted financial professionals to determine when you might be able to retire and develop an exit plan and timeline for how you’re going to make it happen.

Make sure your will and other medical decision-making documents, such as durable powers of attorney and living will, are up to date. Revisit these details every few years to address any changing circumstances. You’ll want to be prepared for medical emergencies and having this paperwork in place can help avoid having you or others make difficult decisions under duress.

Also, this is a good time to be sure your estate planning affairs are in order. In addition to working with your financial advisor to ensure your intergenerational wealth stewardship priorities are addressed, this may also include working with an attorney and tax professional to set up trusts or other gifting structures to minimize estate taxes. You may want to consider long-term care (LTC) insurance. It’s never too early for smart planning, and the younger you are when you purchase a policy the lower your premium will be.

If you didn’t start saving for retirement as early as you may have liked, you still have options. You may want to consider downsizing your home, vehicles and other expenses now that dependents are no longer living onsite. With the right guidance, it’s never too late to start planning. Collaborate with your wealth manager to discuss your own unique priorities and goals.

Finally—and perhaps most importantly, try to enjoy the process of planning for the future: The possibilities are truly endless, and many people are opting to forego full retirement in order to pursue part-time work, including philanthropic work, mentoring or consulting. Regardless of life stage, we should all be mindful of planning for the future, and Mayflower Advisors is here to help you chart—and maintain—your chosen course.

These tips are informational in nature and not intended as individualized financial, legal or tax advice. Wealth management and financial planning decisions are complex and fluid and should be structured around each client’s unique situation and needs. Parties should carefully consider all related benefits, risks and costs and speak to their trusted advisors before making any significant decisions.

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