Did you know that only 26% of American women are invested in the stock market according to a report from S&P global? Did you also know that the women who do invest, consistently outperform their male counterparts by an average of 0.40%? In a survey with 3,600 high-net worth married, divorced, and widowed women in the U.S., roughly 85% of the women take care of day-to-day expenses while men do the long-term planning and investing. In contrast, only 23% of the women surveyed take the lead when it comes to long-term financial planning. If women are consistently outperforming men when it comes to investing, why aren’t women more involved in the long-term financial planning decisions and management of their investment portfolios? We are at a critical time where women need to take control of their financial life now more than ever.
It continues to be an uphill climb for women
Women have different financial situations compared to men, especially in retirement where they are at a financial disadvantage compared to men. Many women work fewer years compared to men because of child rearing or caregiving. In the U.S. there are about 48 million informal or unpaid caregivers to adults and women make up 61% of that 48 million. Also, there still is the issue of the gender pay gap. In 2020 a PEW Research center analysis found that women still earn just 84% of what men earn. On top of that, the gender pay gap contributes to an even larger “gender wealth gap”, which refers to what you own subtracted by what you owe. Women in the U.S. own significantly less than what men own in liquid savings, retirement savings, home equity, etc. Also, women are burdened with more debt, liable for two-thirds of the $1.5 trillion in student debt. So even if women’s wages increased, their overall financial health still dwarfs in comparison to men, leaving women behind in retirement. For example, baby boomer women have an average 401(k) savings balance of $59,000, compared to the average balance of $138,000 for boomer men, according to a recent T.Rowe Price study. What is even more alarming, is that about 1 in 5 women have nothing saved up at all. For women who opt to break the mold and start their own business, they often face struggles trying to attain funding, a problem that men do not have. More so, women of color have it the hardest. They are overrepresented in low wage occupations and are vulnerable to instability in housing. Even though they are usually the primary or sole breadwinner for their families, they are more likely to live in poverty. These are tough challenges that women face which is why they need to start taking control of their financial life now.
Why aren’t more women investing?
On average men have 3 times more in total assets by retirement than women. Primarily because women invest less as they do not consider themselves to be savvy investors, when in fact they are. This apprehension to invest can be caused by the fact that the world of investing and finance is and has been male dominated. A research study conducted by FINRA suggests that 71% of men think they have a high-level of investment knowledge compared to just 54% of women and 49% of men feel comfortable making investment decisions for themselves compared to the low 34% of women who feel confident.
The shifting tide and the obstacles women face in retirement
Americans hold in total about $35 trillion in household wealth. Of this wealth, roughly 70% of affluent household investable assets are controlled by baby boomers and since women tend to outlive men, a great deal of wealth is expected to transfer to women by 2030. On average, an American man will live to age 75, while on average an American woman will live to 80.5. In retirement women are more likely to face disability, chronic health problems and they are more likely to age alone. Almost half (45%) of women over the age of 75 live alone, either due to being widowed, divorced, or unmarried. Also, women often marry men who are older than they are, which makes the survival gap in favor of women even wider. Since they live alone, there is a good chance no one is in their home to help them. Also, despite living longer lives, older women do not necessarily live more active years than men. They are more likely than men to develop debilitating conditions like arthritis, depression and fall related fractures.
In divorce, women often undervalue retirement benefits, usually waiving their rights to pension benefits in exchange for their husbands share of the house. Should you decided to sell the house a few years after the divorce, repair costs, commissions and closing costs can easily erase any gain in value. In a study, 66% of women hope to pay off debt, but only 19% are hoping to build their wealth through investments. Merely taking care of the day-to-day finances is not enough for women to feel secure in their financial future. Women need to be more involved in the long-term planning and investment decisions. As women tend to be more successful than men when it comes to investing, investing can potentially become a valuable avenue for women to close the gender wealth gap and provide them with upwards of hundreds of thousands more when they retire, according to a study by Fidelity.
In the U.S. half of all women who become widowed are under the age of 59 and with the average female life expectancy of 80, women have two decades of potentially manage money alone. Living longer, being more prone to chronic health problems and having less in retirement than men, are some of the reasons why women need to take control of their financial life now more than ever.
Feel more prepared, secure, and confident
By taking control of their financial life now, becoming more involved in the long-term planning and investment decisions, women can feel more prepared in retirement by potentially having more in wealth compared to if they were not investing. Losing a loved one is a traumatic event that can cause debilitating effects. As most women will age alone, if you were not involved in the wealth planning for your family to begin with, the sudden responsibility of having to figure out your finances can cause anxiety which can lead to making financial mistakes. Taking control now, women will arm themselves with confidence knowing they can weather any financial storm that comes their way in the future by having a financial plan in place. Additionally with long-term planning, women can feel secure in their retirement should they develop a disability or chronic health problems that they must deal with alone. Women will feel more prepared and confident in their future by taking control of their financial life now.
What can you do now?
Start by involving yourself in the financial and investment planning conversation with your spouse. If your spouse currently serves as the household CFO, they might be dealing with more anxiety and stress than you may be aware of, because they have the responsibility of managing the finances, which is no simple task. Involving yourself can lessen some of that burden for your spouse and it can help you gain a better understanding of your finances, and you will play an important role in the financial health and investment decisions for your household. If you and your spouse work with a financial advisor already, schedule a meeting and discuss what your financial plans are now. 80% of widows switch financial advisors within a year of their husband’s death, primarily because the advisor had a relationship with the deceased spouse and the wife was never really involved in the planning and investment conversations.
Why hire a Financial Advisor?
Women usually seek security as their primary portfolio objected as they typically feel far less knowledgeable about financial products and investments than men. Some women prefer to manage their own money. However, many women don’t feel confident in themselves to do so, which is why hiring a financial advisor can be a big advantage for women as they try to take on more of the long-term planning and investing. A study from the Spectrem Group found that 61% of women use a financial advisor compared to only 56% of men. Additionally, women who use advisors tend to rely more heavily on them for most of their financial needs, not just investing advice. The Spectrem report also found that women place a higher level of importance on professional designations such as certified financial planner than men do, 78% to 71% respectively. Many women are less interested in being actively involved in the day-to-day management of their investments, which can be beneficial to have a relationship with a trusted financial advisor. With so many choices of advisors out there, take your time and interview a few before hiring one. Know the difference between advisors because not all of them do the same thing. Focus on finding a financial advisor that can actively listen to you and takes his/her time when it comes to recommendations. Work with a financial advisor that is held to a fiduciary standard meaning they are putting your interest ahead of their own and their firm. It will be important to find someone who is a good fit for you, someone you feel comfortable with. Someone who you can collaborate with and will create a financial plan that aligns with your needs, value, and goals and who can bring out positive emotion in you. They will be one of your closest relationships well into retirement.
My name is Kristoffer Fu, CFP®, CPWA® and I am the Founder and Chief Executive Officer at Maven Bridge Capital a Wealth Management Company based in Orange County, CA. At Maven Bridge Capital we are dedicated to helping Women and Small Business owners achieve financial freedom through our personalized holistic planning approach. We focus our efforts in helping our clients reach their financial goals as well as helping them secure a legacy for their families. Reaching a new destination always involves some level of risk, but it’s important to remember that you can minimize those risks by having a plan and being willing to adjust as needed. If you’re looking for help in developing your own personalized financial plan and need wealth management advice, our company is here to help you. With over 15 years of experience managing wealth for our families, we have the knowledge and expertise necessary to help you reach your goals and achieve and unlimited return on life. Contact us today for a free consultation and let us show you how we can help you reach financial freedom. Please see our contact information below.
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Brea, CA 92821
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