Many women in the Baby Boomer generation and those close to it had their most formative years during a period when women weren’t typically considered financial decision makers. And yet, they came of age in a time of sweeping change, including the mass entry of women into the workforce and a consequent push for greater workplace equality with their male counterparts. The latter goal is still far from being achieved; according to the US Census Bureau, women still earn only about 78 cents for every dollar earned by men. But as more and more women enter the executive ranks, it is more important than ever that they realize the need for specialized financial planning that takes women’s needs into account.
One of the most important decisions you will make as you approach retirement is when to begin taking your Social Security benefits. Full retirement age is 67 for those born after 1959, but according to a 2019 study by Transamerica, 55 percent of women were already planning to retire after age 65—or not at all. Nevertheless, Social Security, in some form, is likely to be an important part of your retirement income, when you finally make the decision to retire. Because of their lower lifetime earnings, women typically receive smaller Social Security benefit checks than men of the same age, which makes it even more important to time it correctly when starting to receive them. The maximum benefit is obtained by delaying payments until age 70, and for women who plan to keep working past 65, this can be an important strategic decision. Even for married women, this is important to know, because if a husband can delay receiving benefits until the maximum age, it will increase the size of the wife’s eventual survivor benefit, since statistically most women outlive their husbands. One more note on Social Security: don’t forget about your ex-spouse. If you are still single and the marriage lasted at least 10 years, you can claim a ex-spousal Social Security benefit that may be larger than the benefit you could claim on your own.
It’s pretty typical for a male-oriented financial plan to assume a steadily growing income stream all the way to retirement and possibly beyond. But for professional women, who are statistically much more likely than men to take on the major responsibility for child or elder care, leaving the workforce for just five years to raise children can knock as much as 20% off their lifetime earning potential. Any financial plan for a professional woman that doesn’t take into account the likelihood of some years of less than peak-capacity earnings is unrealistic.
According to Sallie Krawcheck, CEO of ElleVest, women are not more risk-averse than men; rather, they are more risk-aware. This can mean that when they don’t get the type of answers they need around investing, they tend to keep more money in cash—currently earning near 0%—than is advisable for reaching their long-term goals. The answer, then, is not to keep your money hidden under the mattress, but rather to find an advisor who will listen to your questions and give you the answers you need in order to move forward into a long-term financial and investing strategy that is built around your specific situation.
Shone Wealth Management understands the financial planning needs of successful women. If we can provide clarity for you about investing, financial planning, the current market environment, or any other important financial topic, we would love to hear from you. To read our recent article, “The Executive’s Guide to Financial Planning,” please click here.