Financial planning should be a personal experience as unique as each individual, based on their specific goals, needs and priorities. That said, there are a number of common financial factors impacting women as a demographic today that are important to recognize, both in terms of challenges to overcome as well as distinct opportunities.
LIFESTYLE CHALLENGES
Women have continued to make increasing strides toward equality over the past century, from holding a record number of seats in Congress to owning nearly 40 percent of privately held firms in the U.S. according to the National Association of Women Business Owners in 2018 . Unfortunately, however, there are still areas that are far from equal.
Earning less: On average, a woman today still earns 80.5 cents for every dollar a man earns according to the US Census Bureau . Whether this is due to time away from work as a caregiver (either for children or aging parents) or other contributing factors, less income today can also mean less Social Security in retirement; this leads to an even greater importance on personal savings to fund retirement goals.
Living longer: According to The Social Security Administration , a woman age 65 today can expect to live on average until 86.7, as compared to 84.3 for men. This means a retirement plan needs to last for the long haul, and if married, also provide provisions for the unfortunate possibility of going from two incomes to one at some point during retirement. It is critical to find a financial advisor that encourages participation from both partners, so they are equally comfortable with the relationship and feel ownership and confidence in their plan.
Less confidence in investing: According to a recent Fidelity Investments® Survey , only nine percent of women think they make better investments than men (despite their results to the contrary!). Many of those surveyed were also less likely to ask for help because they didn’t know where to start, didn’t feel they had enough saved or didn’t make time for it to be a priority.
LIFESTYLE ADVANTAGES
Despite these statistical setbacks and perceptions, women have a number of distinct opportunities when it comes to managing finances for retirement, as their choices also inherently tend to align with strong returns and financial best practices.
Better at saving: The same Fidelity study showed that women averaged 9% of their salary went to savings (as compared to 8.6% for men) in workplace retirement accounts. And for outside accounts, including IRAs and brokerages, women averaged 12.4 percent compared to 11.6 percent for men.
Have higher returns: While only 9% of women thought they made better investments than men, the women surveyed actually earned 0.4% higher annual returns . These differences may seem small—between both saving more and earning more—the difference can compound significantly over time when saving for retirement.
Focused on planning: Rather than chasing returns or stock picks, women have a tendency to plan based on goals, timelines and lifestyle needs. They trade less frequently and typically are more risk-averse , all of which can be beneficial characteristics for a portfolio, especially at or near retirement.
While women’s confidence as investors has not kept pace with their impact and influence on the overall economy, their often-innate approach to finances can provide many long-term advantages to money management. By recognizing their mounting economic power and identifying their distinct financial planning needs, women can feel empowered on their path to financial independence. Like anything else in life, the single best way to increase confidence is by seeking out information, and the best time to start is now.
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