When it comes to strategic financial planning, there's no cookie cutter, one-size-fits-all, wealth management solution. Every investor has their own unique needs and goals; that goes for women investors, too.
Men and women often approach wealth management differently — and they should. From practical considerations to social and cultural expectations, women need to take certain financial realities into account in order to best meet their financial goals. Here are 3 financial planning areas that commonly affect women, and how to address them with your strategic financial plan.
The Gender Pay Gap: Does an Investment Management Solution Exist?
Regardless of causal factors — and despite gains toward equality in recent decades — research indicates that women make between $.78 and $.84 for every dollar made by men. This discrepancy can mean the difference between a five- and six-figure income, and over a lifetime of working, those lost cents for each dollar really add up. This can put women at a disadvantage when it comes to planning for retirement, as they may have less money to put aside into savings.
Women also have a longer life expectancy than men (86.6 years for women vs. 84.3 for men). This means that women should plan for a longer retirement, which means more savings are necessary. It's somewhat of a double whammy: less income to save compounded by the need to put more savings away. Women can overcome these factors by working with their retirement plan advisor to determine financial strategies that may include:
- Taking full advantage of 401k and other retirement savings plans by contributing the maximum amounts
- Ensuring that they're protected by disability and long-term care insurance
- Taking ownership of their income and financial well-being
Cultural Differences: Women and Wealth Planning
Not only do women statistically make less and live longer, they tend to think of money differently than do men -- and thus make different spending and investing decisions. Multiple studies indicate that women are more likely to make financial decisions with the benefit of their families in mind; some posit that women are culturally and socially expected to make financial decisions that put their children, parents and other family members first.
While this tendency isn't a problem in and of itself, it can become a problem if women help out family members at the expense of their own financial futures and security. For instance, a woman may understand the need — and have the desire — to put money toward her own retirement savings, but she may place the needs of her adult children or her elderly parents first, leaving herself at risk. We have experienced this with a number of clients at Premier over the years.
The conundrum may be a bit easier to understand when viewed in light of the standard advice offered on airline flights: In case of an emergency, put your own oxygen mask on first, so you can help others with theirs. This sage advice can apply to financial planning as well, because it's hard to help others when you're struggling, yourself.
Women and Wealth Planning: A Confidence Gap?
Research indicates that women tend to have less confidence in their investing decisions than men. More than half of women think their male partner or spouse is better at investing, and 80% of wealthy women consider themselves "beginners" when it comes to investing. Unfortunately, this lack of confidence can affect investment decisions, from how much risk a portfolio can bear to a lack of ownership in financial decision-making.
This is where a trusted wealth advisor can help. By working with an advisor to design wealth management solutions and gaining education about the many investment options available, women can overcome these common financial planning pitfalls and create a secure financial future that meets their own individual needs.