You have all the balls in the air, and you juggle them well.
But do you feel confident you’re prepared for the future?
According to a study from Ameritrade, 84 percent of women manage their household finances. However, only 12 percent of those surveyed said they were “very confident” they would be able to retire with a comfortable lifestyle, according to a Transamerica Center for Retirement Studies survey.
As a group, we’re good at saving, and nearly 70 percent of us are regularly saving in both employer-sponsored retirement accounts and savings outside of the workplace, another Transamerica Center study found.
But we tend to invest less overall, with only 26 percent of women factoring in investment returns as part of their savings strategy, according to Transamerica. Sixty-one percent of us have money in savings but it’s not invested, because savings typically make us feel safe while we consider investing a source of stress.
We control 90 percent of our personal and family finances, and we’re good at that ebb and flow of cash in, spending out, and prioritizing saving and protecting our families. But women’s finances only have 1/3 the amount of dollars saved for retirement that men do, according to a Transamerica Retirement Survey conducted in 2018.
How can we turn that around? We’re savvy with finances and we know we want to be prepared.
Women’s Finances: Start with Where You’re Going
To best prepare for your future, you need to know where you want to go.
This might vary depending on the stage of life you’re in. Maybe you’d like to ensure your children have a quality education, or you dream of a second home near the beach. If your parents are aging and may not have the income they need to meet medical costs, helping to care for them as they age may be a major goal. Perhaps you’ve always dreamed of traveling the world, and you want to be prepared to realize that dream. Perhaps you’re less than a decade from retirement and you want to get serious about a plan but you’re not sure how.
The first step to making sure you’re on a solid financial path is to decide where you want to go with women’s finances.
Work with a Professional
Once you have your goals outlined, you don’t have to blindly hope that the decisions you’re making with your finances will magically get you there.
Working with a financial planner will help you put together a solid strategy for how to get there. Financial planners, often working at a wealth advisory firm, can have qualifications including being a Certified Financial Planner®, a Chartered Financial Analyst, a CPA, or a designated Certified Estate and Trust Specialist. This means they have both the training and the tools to help you finesse the right strategy to reach your goals.
Start the Conversation
If you’re going to meet with a financial planner, you can come prepared with questions to educate and inform before you move ahead with a relationship. You can ask:
- What services do they provide?
- Do they have professionals with credentials such as CERTIFIED FINANCIAL PLANNER®, CPA, Chartered Financial Analyst, etc.?
- What is their investment philosophy – how do they approach investments for their clients?
- Are the investments they use proprietary, or does their selection process remain objective to all possible investments available?
- How does their due diligence process work to select investments?
- How do they typically communicate with clients, and how often?
- How much are they willing to educate you on your plan? Will they bring you up to speed on all the details or will they plan to hum along with details and only touch base with you if you inquire?
- How do they get paid? Look for a fee-only advisory firm.
As you’re discussing your thoughts and plans, you’ll be able to get a feel for their personality and if they’d be a good fit to work with you.
Understand the Components
A financial plan will pull together details of your existing finances including cash flow needs, existing investments, tax brackets and strategy, retirement accounts, existing benefits from an employer, and any estate planning needs you have.
As you work through the details of a financial plan, you’ll discuss many facets: who are the beneficiaries on your accounts and investments; what level of risk will you need/are you comfortable with; what your responsibilities will look like in retirement. Women’s finances should be built around your goals and your future.
Planning can get very down in the weeds, considering everything from when to take social security (you can take it at an earlier age and have it discounted for life, or wait until later while still avoiding penalties), understanding taxes both before and during retirement, understanding how recent regulatory changes might apply to your plan, and learning how Medicare benefits are based – off of your current earnings. You’ll likely cover what can and should be included in a will, but also how you can protect assets that fall outside of a will, such as a retirement account.
When planning for the future, investing is often a major component. Understanding types of investments and what type of risk they entail will be helpful, and a quality financial advisor will discuss with you everything from fixed-income (bond) investments to equity (market) investments, as well as different quality equities and the balance of risk and return. The old adage of bigger risk bigger return may not always be true, and your investments should match your long-term strategy and risk tolerance.
Once a financial plan is laid out, your financial planner and wealth advisor will monitor the plan and how your life changes may trigger adjustments to the plan. It’s good to do at least a yearly checkup on your finances, and keep a lookout for ways you can be maximizing your strategy, whether it’s using a SEP or Simple IRA as a small business owner to minimize taxes or increasing your 401(k) contributions. Re-aligning as the markets shift is key.
Women are shrewd, manage money with sophisticated acumen, and are passionate about keeping our finances steady. The next step to help you protect your and your family’s future is to create a financial plan, which not only will likely help women’s finances reach their goals but also relieve anxiety you may feel about the future. Especially during the uncertain times we’re living through, starting a conversation with a financial planner may help you better position yourself for future market volatility and life changes.