March is Women’s History Month, a month-long celebration of female empowerment1. This effort includes advocating for better representation in the workforce, pay parity, and improved work-life balance. Let’s discuss some specific steps that women of all ages and all stages of life may take to overcome challenges and manage their financial future.
Challenge 1: Women Live Longer
Longevity is a good thing—but when it comes to funding retirement, it also means needing more accumulated wealth than someone who may have a shorter life span.
Determining how much you may need for ‘life after earned income” might seem daunting. Especially for women, who must plan to live longer – on average – than their male counterparts.2
Even longer if you may want to leave financial resources to beloved family, a philanthropic endeavor, or other purposes after you aren’t here to take care of those goals yourself.
Whether you have a particular date in mind by when you want to be certain you will have no need for earned income, or just want to satisfy yourself that your money won’t run out before your life does, here are some strategies to consider:
- Contribute as much as possible to tax efficient wealth accumulation mechanisms ~ your 401(k)—especially if you get an employer’s matching contribution or may be eligible for a ‘solo 401K’. Consider Roth savings to get federal income taxation out of the way once and for all.
- Consider investment returns that are appropriate for your age and stage of life. If you are young, you might afford more risk. Manage risk more carefully if you are now or plan soon to rely on your investments for income for lifestyle expenses .
Regardless your age or investment objectives, do not get discouraged. It is never too late to begin to save or save more. Suppose you are not sure about having enough for retirement. In that case, you may want to consider lowering expenses by adopting a more frugal lifestyle, continuing to work a few extra years,or starting a side business.
Challenge 2: Emergencies
Creating and maintaining an emergency fund is the only way to break a cycle of living paycheck-to-paycheck. Without an emergency fund, you may pull out a credit card whenever an unexpected expense arises, such as a vehicle repair, vet bill, or needing to replace an appliance.
By setting aside a few months of living expenses in an accessible account (like a savings or money market account), you might have less stress from knowing that you have resources to help cover emergencies.
Challenge 3: Money Discussions
In many marriages, one partner may take the lead in financial matters. This strategy may leave the other partner uninformed. Divorce or death can be more complicated and heartbreaking if the spouse who does not manage the money is surprised by the financial situation.
Make time for money conversations—even uncomfortable ones. Discuss your goals, values, and plans for the future with your life partner. Not only might this help you understand your financial status, but it may also improve communication with your spouse.
Challenge 4: The Social Security Enigma
Part of adequate retirement savings includes knowing how much you expect to receive in Social Security benefits, whether on your earnings or your spouse’s record. The Social Security Administration offers an online tool that reports your earnings history and projected Social Security benefits.2
It is important to review your earnings record to ensure its accuracy. Should the system understate your earnings, your monthly benefit could be lower than it should be.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risks including possible loss of principal.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
1 March is Women’s History Month
2 5 Things to Know About Women and Retirement, U.S. DEPARTMENT OF LABOR BLOG
2 Social Security in Retirement