Women today are far more likely to be the head of household and manage their own finances than in previous generations. And despite the persistent pay gap, workplace advancements mean they are in far less precarious financial straits than in the past. However, when it comes to financial literacy and retirement planning, many are still lagging behind. According to a recent U.S. Census Bureau survey, approximately 50% of women ages 55 to 66 do not have any personal retirement savings. Only about 20% of women who have never been married have $100,000 or more in retirement savings, and only 36.6% of women previously married once fall within this range. (1) This is why it’s important for women to master financial strategies to get ahead. Here’s what women should consider doing when flying solo into retirement.
1. Boost Your Financial Acumen
Society has conditioned many women to believe that they aren’t good at managing money. But being financially literate is no more difficult than learning any of the other topics you’ve mastered in your life.
Start by looking through your financial documents and becoming familiar with your assets and accounts. Google unfamiliar terms and use websites such as Investopedia.com to acquaint yourself with the language of money. Read guides, articles, blog posts, and books written by trusted sources, and listen to financial podcasts.
2. Prepare for the Unforeseen
We may not always know what’s ahead, but we can almost guarantee some unforeseen circumstance will occur that could cause a financial setback. It may be a relatively minor inconvenience, such as a broken appliance, or it could be a major blow, such as a job loss followed by prolonged unemployment or a serious illness.
The best way to protect yourself is to plan for the worst. If you don’t already have one, make establishing an emergency fund a priority. As a rule of thumb, start with $1,000 at minimum in easily accessible money, and aim for six months to a year of living expenses in liquid assets. Equally critical, you’ll want to ensure that you have adequate income replacement disability coverage and long-term care insurance, either through your employer or personal policies.
3. Reevaluate Your Expenses
Take a close look at your spending and make sure your budget aligns with your values, means, and what’s most important to you now and in the future. This might involve making some adjustments. For example, a casual potluck and game night with friends can be just as fun as meeting up at the trendiest restaurants — but less expensive. Do you really need a new car this year? Could you resell items you no longer wear? Could you switch out the five-star hotel for a less expensive Airbnb on your next vacation?
Don’t be afraid to downsize your lifestyle or even your home. Just because you’ve always lived in a big house doesn’t mean you can’t be just as happy in a smaller apartment. Reconsidering possibilities can make a big difference in your happiness and your financial security.
4. Shore Up Your Investments
If you have existing investment or retirement accounts, go through them carefully with a critical eye, preferably with help from a financial advisor. Are you maximizing your potential returns? Are you taking full advantage of tax savings? Are your accounts appropriately diversified for your retirement time horizon?
Even if your account balances are nowhere near the ideal for your stage of life, it’s not too late to improve your situation. If you are in your fifties or sixties, be sure to take full advantage of retirement plan catch-up contributions or other workplace retirement accounts.
5. Protect Your Best Interests
More people than ever are finding love and getting married later in life, even those who have never been married before. When merging finances at any age — but particularly when you are well established — proceed with a healthy dose of caution.
You’ve accumulated your assets over a lifetime and you have fewer earning years to make up for mishaps, so there’s a lot at risk. No matter how much you trust a person, marriage or even cohabitation can put your nest egg in jeopardy. An illness, debt, or poor decisions made by their adult children, for example, could be costly. Be sure to put protections in place to limit your exposure.
6. Plan for Inevitable End-of-Life Decisions
As a single person, it’s critical that you get serious about your end-of-life decisions. Otherwise, you will leave those decisions up to the state by default.
If you are incapacitated and unable to speak on your own behalf, who will speak for you? You’ll want to have medical and financial powers of attorney in place; think about who that will be and make sure they are on board with the responsibility.
When you pass away, who will inherit your property? Make sure the beneficiaries on your insurance policies, bank accounts, retirement, and other investment accounts are up-to-date and that you have a will. This is particularly important if you are recently divorced and do not want your ex to inherit your estate.
Enjoy Your Retirement
Flying solo in retirement doesn’t have to be scary; it can be a liberating, exciting, and comfortable time of life. By becoming educated in financial matters and making savvy financial decisions to set yourself up for success, you can head into retirement ready, empowered, and confident about your future. The best time to start preparing is now.
Russell D. Rivera, CFA, CFP® is the Founder and President of Voice Wealth Management (Voice) in New York, NY. He also likes to think of himself as a Personal CFO and Financial “Therapist” for entrepreneurs, young professionals, and their families. He helps clients make prudent financial decisions regarding spending, saving, investing, and planning while giving a voice to the individual client's financial priorities and experiences.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.