A lot of the women I speak to are worried about outliving their money…and for good reason. In addition to all the risks that everyone faces, such as the risk that inflation will soar or the market will tank, the career and life trajectories of women are often very different from those of their spouses or male friends. Unfortunately, these differences can pose significant financial risks and decrease the chances that you’ll be able to retire with the financial ability to live life on your terms.
1. Have fewer years of earned income – Sixty percent of caregivers are women, and the need to care for their children or aging parents often creates gaps in women’s employment history. When you’re going in and out of the workforce you’re not continuously making and saving money.
2. Spend time in the “sandwich generation” – You’re caring for your own children and your aging parents at the same time, possibly helping to pay for your parent’s financial needs as well.
3. Are single parents – Unless they’re receiving a much higher than average amount of alimony and child support, single moms face the high cost of childcare, issues related to being in a single-income household and more. This can make it difficult, if not impossible, to save for retirement.
4. Tend to live longer – Because three out of four women outlive men, women require a bigger retirement nest egg. For example, if you live to age 65 you’re likely to live another 20.6 years, while a man who lives to age 65 is only likely to live another 18.1 years.
5. Are raising their grandchildren – This happens more frequently than you may realize and usually represents a huge financial hit. In the U.S., over 6% of kids are living in households headed by grandparents.
6. Are likely to outlive their spouse – Because women live longer and are often younger than their spouse, they are more likely to be single when they die. Widows face a number of financial risks that often get overlooked, such as:
a. Depleting your savings to pay your spouse’s medical bills.
b. Seeing your income plummet, because you’re losing his Social Security
check and possibly his pension. I’ve seen widow’s income go down by 30
to 60%. Meanwhile many of your expenses, such as housing, stay the
c. Getting pushed into a higher tax bracket, because now you’re “single”
instead of “married filing jointly.”
7. May face financial elder abuse – Most of the time this financial exploitation happens when a trusted family member takes advantage of the relationship and takes money from you.
Because women face so many potential financial pitfalls, it is vitally important that you take an active role in planning for your financial future. Your best bet is to work with a professional who has the training and expertise to provide the guidance you need.
What are your thoughts? I invite you to freely comment.
As a financial advisor and fiduciary with a focus on retirement planning, I’m here for you. Let’s talk!