While many people don’t consider gender important in financial planning, there are actually a number of unique obstacles that women face. Whether it’s the length of their lives or the struggle to break the glass ceiling in their industries, these factors should contribute to how women approach their finances. Healthy financial planning for women takes careful consideration and anticipation of these factors.
Learn more about what you should take into account as a woman when you’re looking at your finances & wealth
The World Health Organization, among other institutions, has concluded that women generally live a significant amount longer than men. Based on a number of biological advantages, many women live six to eight years longer than men. While this varies by region, race, and income level, with up to eight extra years of living, women must save more money in their retirement fund to ensure they have enough to pay their bills and support themselves in later years.
Most financial experts recommend that you save enough to replace about 70% of your pre-retirement income. If you’re making $50,000 pre-tax annually now, you should anticipate living off of $35,000 per year after retirement. This amount may be made up of savings, investment dividends, part-time work, social security, IRAs, and pension money. Now think about saving to live off of $35,000 per year for an additional six to eight years due to your longer lifespan — you could need to save up to a quarter of a million dollars more than men!
While the wage gap has been shrinking between men and women, pay still isn’t exactly equal. In the past three years, women have been earning about 85% of what their male counterparts earn. This impacts financial planning heavily, as women can’t save as much as men. To offset the wage gap, women have to be more frugal with their funds to be able to save the same amount as men. Explore your budget to see if there are places where you can lower your monthly bills and leisure spending to funnel more money into savings accounts, retirement funds, and investments.
Studies show that growing economic opportunities for women are related to declining marriage rates. Because women can now provide for themselves, unlike 40 years ago, many are delaying marriage and family planning to build their financial futures. Unfortunately, there are a number of tax benefits that married couples enjoy that are not available to single people.
Since men are much more likely to be married (regardless of earnings or age), they share their tax burden with a spouse and face lower tax rates than many single women due to incentives revolving around income taxes, social security, and IRAs. Over the course of their lives, single women are losing over a million dollars in taxes when compared to married people.
While financial independence is important, women should be aware of the pitfalls they face when paying taxes solo and plan appropriately.
Higher Medical Costs
Generally, women pay more than men annually when it comes to average healthcare costs. In fact, they’re more likely to be impacted by expensive chronic and terminal illnesses over the course of their lives. Since women are also expected to live longer than men, and healthcare costs increase exponentially as you age, many women must tap into resources that are meant to pay for other retirement costs to pay medical bills.
You can offset these unexpected costs by increasing the amount in your emergency fund, saving more for retirement, and even investing your funds post-retirement in low-risk opportunities.
Less Aggressive Investors
There are a number of gender-related patterns that dictate behavior for both men and women. When it comes to investing, analyses of retirement accounts show that women are significantly less aggressive than men. Women generally opt for lower-risk investment options that are less likely to pay out big dividends and they gravitate towards investments in cash and bonds to create a more conservative portfolio. There is also a tendency in women to lack confidence in their investment knowledge which also leads to lower amounts of invested funds and lower retirement totals from investments.
Caring for Family
One of the most difficult issues facing women financially is the demand to care for their families. Many women face caring for their elderly parents as well as taking care of their young children. Due to the financial, emotional, and timely demands on them, they often spend up to 12 fewer years in the workforce than men. When faced with caretaking requirements, here is what most women do:
- 33% Decreased Working Hours
- 29% Passed On Promotions or Assignments
- 22% Took Time Off Work
- 20% Switched From Full to Part-Time Work
- 16% Quit
- 13% Retired Early
This type of responsibility generally affects women between the ages of 45 and 54, so your earnings as a younger woman are more critical than ever. With many Boomers retiring and requiring more hands-on care, women within the Gen-X, Millennial, and Gen-Z categorizations will soon be giving up their time and money to attend to the needs of elderly family members.
What Are Your Options?
As a woman facing these issues, there are a number of steps you can take to mitigate the impact they may have on you. To ensure you’re financially empowered, consider learning more about budgeting, investing, and documenting your finances. It’s always good to know how much you have coming in, how much you’re spending, and where your money is going. Being more aggressive about asking for raises and investing in your portfolio will also help you in the future.
While these are personal steps you can take, there are also systemic changes that need to be made including closing the wage gap, providing better support for elder care and childcare, and increasing the availability of basic financial education to young people. Consider contacting your legislators and political representatives to push these issues forward and create a better financial future for everyone.
Katie Tejada is a writer, editor, and former HR professional. She covers the latest developments in HR, business communication, recruiting, and CRM solutions, but also enjoys writing about events, home trends, and travel.