By Cathie Ericson
This post originally appeared on LearnVest as “How Women's Finances Can Differ from Men's.”
March 8 is International Women’s Day: A great day to celebrate the strides women have made socially and economically, as well as a good time to remind ourselves of the challenges that still exist that can impact a woman's finances over the long run.
Below, we've outlined four of them — lifestyle and economic factors that may seem daunting but aren't insurmountable if women tackle them head on and account for them in a financial plan.
1. Women live longer.
According to the latest life-expectancy figures from the Centers for Disease Control, women are expected to outlive men by an average of nearly five years. Being told you'll live a long life is never bad news, but the reality is not all those years may be footloose and fancy-free.
“[Five years] doesn’t sound like a lot, but they can be some of the most expensive years because of health and long-term-care issues,” says Lyn Dippel, CFP®, president and CEO of FAI Wealth Management. Case in point: University of Michigan researchers found that despite living longer, women tend to have fewer active years in good health than men do.
This means that not only may women have to plan for a longer retirement than they expected, they may also need to make medical and long-term-care costs a priority when projecting expenses in retirement (particularly as women could end up paying more for long-term-care insurance than their male counterparts).
Of course, there’s no way anyone can predict what'll happen later in life (skydiving at 75 is still a possibility!). But the one thing you can take charge of right now is prioritizing your retirement savings in order to take advantage of compound growth. Here are a few tips to help you get started and pointers on how to crunch your retirement number.
2. Wives are likely to outlive their husbands.
Here's the good news: Widows will become less common over the next 50 years or so, according to an analysis from the Urban Institute. Here's the sobering news: The organization still estimates that about half of women will live for at least a decade past their spouse after age 65.
So what does that mean when it comes to finances? Simply put, being up-to-date on estate-planning docs so you’re not left in the lurch if something happens to your partner, recommends Dippel — which is really a good idea for either gender, at any age.
You might already know about powers of attorney that indicate who can handle your legal and financial affairs but don’t overlook medical powers of attorney. Because of the HIPAA privacy rule, health care providers are forbidden from sharing information — even with a spouse — without a medical power of attorney for healthcare. Without this document, you wouldn’t be able to make medical decisions on behalf of your spouse, or another family member wouldn’t be able to make decisions for you. These docs (along with any wills or trusts) should be updated at least every five years, Dippel recommends.
A living will, meanwhile, is similar in that it shares a person's wishes in the case of death or an end-of-life decision. Many states also provide a POLST form you can fill out that lays out your medical orders, but it must be on file with a hospital before it’s needed.
Also super important to keep up-to-date: beneficiary forms for things like insurance policies, retirement accounts and other types of financial accounts — especially because beneficiary designations will trump what’s stated in a will if there’s a discrepancy.
Not sure what else you might need to set up an estate plan? We’ve got a handy list of six key docs here.
3. Women have more earning-power challenges.
Even with supercharged careers, research shows that the onus of taking care of the family in the home still lies mostly in the hands of women: According to a 2015 Pew Research report, mothers with kids under the age of 18 were three times as likely as dads to say that being a working parent made it harder to advance in their jobs. The result is that women may have to downshift in their careers or leave the workforce entirely for periods of time.
And of course we can’t forget about that gender wage gap, which is about more than just earning fewer cents on the dollar: A 2014 PayScale study found that women’s pay plateaus, on average, at age 39, while men’s continues to grow until age 48.
All of these factors can ultimately impact women’s salaries (and retirement contributions!) in the long run. But in the end, that provides women all the more reason to go for it in their careers, says Mikaela Kiner, founder of human resources consulting firm Uniquely HR. That means throwing your hat in the ring for a big job even if you don't feel completely qualified. “Often the ideal candidate meets only 80% of the qualifications [anyway],” Kiner says. “If you meet 100%, you may be bored quickly!”
And women shouldn't shy away from asking for promotions or negotiating salaries, which Kiner still sees as an issue for many female workers. “It never hurts to ask, and the majority of the time companies hold a little something back. They expect candidates to ask, so don't leave anything on the table,” she recommends.
If you’re a new mom just starting her re-entry strategy, you might struggle with the idea of going back to work knowing childcare expenses may eat up your paycheck. But consider the long-term professional impact too, says Carol Fishman Cohen, CEO of iRelaunch, a career consultancy that specializes in professionals returning to work after a hiatus.
“The first couple of years back might feel like a break-even proposition, but you are investing in the more profitable years to come,” she says, noting that daycare costs will decrease as kids get older. “You have planted the seeds for higher compensation because you went back earlier.”
4. Women tend to put family finances first.
How often have moms had to set aside their 'me' time in order to come to the family's rescue? Pretty often, we'll bet.
That same mentality seems to hold true in money matters, too. That is, women seem to prioritize being the household’s Chief Financial Officer before being their own Chief Investment Officer. According to a 2015 Fidelity survey, 72% of women feel confident that they can manage and balance the family budget, but only 37% could say the same about planning for their retirement needs.
Although Dippel does see this gap when it comes to women and investing, she finds that those who finally take the plunge often end up making better investment decisions than men. “This is in part because women view investments as the means to help them attain a particular goal, which helps them stick to the strategy and not constantly shift gears,” she says. “Men tend to be more focused on the return number itself [and] therefore tend to be less consistent, less diversified or have a mismatched risk exposure.”
The lessons here? Don't make hasty investment decisions based on changing market news — but do keep tabs on your retirement account on at least an annual basis so you can assess your progress with your future retirement goal in mind.
And if you’ve got other long-term financial goals that you’re trying to meet (think five or more years away), consider whether a brokerage account could help you achieve them, after you’ve weighed the risks of investing. If you don’t feel confident about investing simply because you don’t feel you know enough, it’s never too late to get started — we’ve got some basics for you here.
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