David Lerner Associates: Financially Speaking, Women and Men are Different
Women today have never been in a better position to achieve financial security for themselves and their families. What financial course will you chart?
It is important for women to educate themselves about finances, make financial decisions, seek professional help when needed, and implement plans to ensure that they and their families will have financially secure lives.
1 The National Vital Statistics Reports, Volume 61, Number 4, May 8, 2013
2 U.S. Department of Labor, Bureau of Labor Statistics, Women in the Labor Force: A Databook, December 2012
3 U.S. Census Bureau, Current Population Reports, P60-245, 2013
4 U.S. Department of Labor, "Women and Retirement Savings," October 2011
5 U.S. Department of Labor, "Women and Retirement Savings," October 2011 Financially Speaking, Women and Men are Different
All of us know males and females 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 end up 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 influence is growing, and women's impact on the traditional workplace is still evolving positively as women earn college and graduate degrees in record numbers and seek to successfully incorporate their work and home lives to provide for their families. So what financial course will you chart?
Some key distinctions
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 4.8 years longer than men.1 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
Women generally earn less and have fewer savings. According to the Bureau of Labor Statistics, within most occupational categories, women who work full-time, year-round, earn only 82 % (on average) of what men earn.2 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 because of a longer life expectancy. With smaller financial cushions, women are more vulnerable to unexpected economic obstacles, like 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.3.
Women are more likely to take career breaks for caregiving. Women are much more likely than men to take time out of their careers to bring up children and/or care for aging parents.4 Sometimes this is by choice. But by moving in and out of the workforce, women face a number of significant financial implications:.
- Lost earnings, employer-provided health insurance, retirement benefits, and other employee benefits.
- Less financial savings.
- A potentially lower Social Security retirement benefit.
- Potentially a harder 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 leads to less income, and by asking for flexible work schedules, which can impact their career advancement (and thus the bottom line) if an employer unjustly assumes that women's caregiving responsibilities will come at the expense of commitment to their jobs.
Women are more likely to be living on their own. 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.
Women sometimes are more conservative investors. 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, though, women tend to be more conservative investors than men,5 which means their savings might not be on track to meet their financial goals.
Women need to protect their assets. As women proceed 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 taking care of their day-to-day responsibilities to make the effort to implement an appropriate plan.
Actions women can take
In the past, women may have taken a less involved role in household financial decision making. But, for many, those days are over. Today, women have more financial responsibility for themselves and their loved ones. So it's critical that women know ways to save, invest, and plan for the future. Here are some things women can do:.
Be in control of your money. Create a budget, manage debt and credit wisely, set and put in priority financial goals, and execute a savings and investment strategy to satisfy those goals.
Become a knowledgeable investor. Learn fundamental investing concepts, such as asset classes, risk tolerance, time horizon, diversification, inflation, the role of various financial vehicles like 401(k)s and IRAs, and the role of income, growth, and safety investments in a portfolio. Search for investing opportunities in the purchasing decisions you make every day. Have patience, be willing to ask questions, admit mistakes, and seek assistance when needed.
Retirement Planning. Save as much as you can for retirement. Estimate the amount of money you'll require in retirement, and how much you can anticipate from your savings, Social Security, and/or an employer pension. Recognize how your Social Security benefit amount will change depending on the age you retire, as well as how years spent out of the workforce might affect the amount you receive. At retirement, make certain 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
Advocate for yourself in the workplace. Have confidence in your work ability and advocate for your worth in the workplace by researching salary ranges, negotiating your starting salary, seeking highly visible job assignments, networking, and asking for raises and promotions. In addition, keep an eye out for new career opportunities, entrepreneurial ventures, and/or ways to grow your business.
Try to get help to balance work and family. If you have children and work outside the home, investigate and negotiate flexible work arrangements that may allow you to keep working, and make certain 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.
Protect your assets. Identify potential risk exposure and execute strategies to reduce that exposure. As an example, life and disability insurance is vital to protect your ability to earn an income and/or care for your family in case of disability or death. In some cases, more sophisticated strategies, such as other legal entities or trusts, may be needed.
Create an estate plan. To guarantee that your personal and financial wishes will be carried out in the event of your incapacity or death, think about executing basic estate planning documents, such as a will, trust, durable power of attorney, and health-care proxy.
A financial professional can help
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 teaming up with a financial professional who can help them understand their options and implement plans developed to provide women and their loved ones with financially secure lives.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates Cal 516-921-4200 Visit our website: http://www.davidlerner.com