Other than the obvious, financial planning for women is very different than financial planning for men. As a group women earn less, bringing in only 73%* as much as men over the course of their lives whether they take time off to raise a family, inequities in the workplace, or a propensity to choose lower paying professions. The median income for women in 2008 was $35,745* compared with $46,367* for a man. That means that the average working woman is starting with a handicap of about $10,000 a year, or $400,000 plus appreciation over a 40 year career.
Women take time off to have and raise children, which often removes them from the workplace for 5 to 10 years. In this time they miss out on earned wages, promotions, technology advances, and most importantly, lost years of contributions to their retirement funding. Let's assume a 25 year old earning $25,000 per year takes off five years to start a family. If she were a diligent saver putting 15% into her 401(k) plan, at age 65 with 8%compounded growth, without considering taxes and inflation, she would have sacrificed more than $325,000 plus matching contributions and growth from her employer, not counting the $125,000 in lost wages. Additionally, taking off five years may affect the best 5 of 35 years of earnings to determine her social security benefit at retirement. Additionally, oftentimes women take time off to care for elderly parents, as the primary caregiver.
WHAT'S WRONG WITH THIS PICTURE?
In most families the spouse who makes the most money is the one who controls and makes the investment decisions. In some 15%* of families the wife earns the highest income. In 26%* of families the spouses earn within a few thousand dollars of each other. But that means, in 59%* of families the man is the highest wage earner and is making most of the family financial decisions. Yet, it is the woman who is likely to live the longest, based on current mortality tables. Rarely is this fact taken into account when family planning takes place.
Retirement planning for women can be different than retirement planning for men. Women who find themselves suddenly single due to divorce or widowhood find themselves in a foreign place, often with outdated (or void of) legal documents, life insurance, and tax assistance. It is at this time that an association with trusted advisors that she can understand and feel comfortable with is paramount to the beginning or continuation of your long-term financial plan. Feel free to call Elizabeth in our planning department to see how she may be able to assist in helping you to achieve your short and long-term goals.
*According to the US Census Bureau