In honor of women’s history month, we acknowledge the many achievements and contributions women have made throughout the years, but we also recognize the unique challenges they face. From a financial perspective, women are faced with certain realities that shape how they think of their future stability. Understanding what obstacles may lie ahead can help successfully plan for various potential scenarios. As Marie Curie wisely said, “Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.” Below I have outlined three concepts women can explore to help achieve financial independence. While all scenarios may not apply to your particular situation, the action steps listed can certainly be used as a guide for those interested in a healthier financial future.
Planning for a Long Retirement
It is no surprise that statistically, women live longer than men. This typically means the female will care for the male spouse, but then she will need to pay for assistance when she needs it. If the goal is to age in place, further accommodations will need to be made to ensure the home is fully accessible. A financial advisor can be helpful with income planning while accounting for longevity. Strategies can include, but are not limited to:
- Social Security Benefits
- Pension Elections
- Annuity Options
- IRA Distributions
Cash flow planning in retirement is yet another way to provide a sense of security, and the first step in the process is to understand your options.
The Sandwich Generation
This refers to those in a phase of life that are caught between raising children and caring for aging parents. During this period, it is particularly difficult to ensure you are fulfilling your needs when the demand for your time and resources are weighed on so heavily. While this can apply to both men and women, women tend to play the role of caregiver. As you try to both save for college and pay for home health assistance, the constraints can result in compromising your personal goals, like saving for retirement. You may forgo saving because funds are needed elsewhere, or you may find yourself sacrificing career opportunities that could afford you the ability to earn more. It is important to remember that while certain compromises may be made along the way, it is also imperative to know your non-negotiables; where you can and cannot afford to give before it jeopardizes your financial goals.
Divorce Complicates Things
Divorce not only brings emotional anguish, but it can also be financially disruptive. This is because life as you pictured it has changed, and certainty is ushered in by the unknown. In my opinion, the best way to mitigate financial devastation is to have a plan and stick to it. You are never too young to have a plan, and to know this plan can change over time as life evolves. Goals may include buying a first home to having a certain amount in savings that equals financial freedom. These goals may begin by planning for an individual and can be adapted over time to account for an expanding family.
Depending on how much wealth you have amassed alone, you may consider a prenuptial agreement to protect the assets that you had acquired prior to marriage. While married, you may consider certain estate planning techniques, such as trust creation, to ensure funds are earmarked for certain purposes. This is also very popular for folks who have children from a previous marriage and want to divide their legacy so both the current spouse and children are cared for.
If you are just beginning the divorce process, you will need to be thinking about what life will look like on your own. Start by identifying your fixed costs versus discretionary spending. This will help you evaluate where you have wiggle room and where you don’t, thereby indicating what adjustments you might need to make. Be sure to clearly define shared expenses going forward, such as childcare. Defining things that go beyond daily living expenses such as health care and college tuition provide a degree of certainty around which you can plan.
The best thing you can do to help ensure financial independence is to take charge of your finances now. Research your needs and engage a professional (like StrategicPoint) where appropriate to deepen your understanding of your financial situation. Remember that knowledge helps to quell uncertainty, and a proper plan helps set goals to achieve financial independence.
The information contained in this post is not intended as investment, tax or legal advice. StrategicPoint Investment Advisors assumes no responsibility for any action or inaction resulting from the contents herein. Kristina’s opinions and comments expressed on this site are her own and may not accurately reflect those of the firm or our parent company, Focus Financial Partners. Third party content does not reflect the view of the firm and is not reviewed for completeness or accuracy. It is provided for ease of reference. Certain statements contained herein may be statements of future expectations and other forward-looking statements that are based on SPIA’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue” and similar expressions identify forward-looking statements. Forward-looking statements necessarily involve risks and uncertainties, and undue reliance should not be placed on them. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. SPIA assumes no obligation to update any forward-looking information contained herein.