At Finomenon Investments, we understand that women have unique financial needs and opportunities. After all, we have learned by working with our women clients who lead corporate careers while managing their family commitments.
Whether you’re navigating retirement, supporting family, or starting fresh, it’s important to have control of your financial future.
Some Key factors We Consider
- Earning Less Over Time: It’s sad but true that women, on average, earn about 82 cents for every dollar earned by men, according to the U.S. Bureau of Labor Statistics. This wage gap can significantly impact lifetime earnings, making it harder to save and invest the same amount as men, reducing their overall retirement savings potential. COVID has exacerbated this issue.
- Longer Life Expectancy: Women tend to live about 5 years longer than men, on average. This extended lifespan means they need to save more to ensure their retirement funds last throughout their life. Without proper financial planning, women could be facing a higher risk of outliving their savings.
- Lower 401(k) Balances: On average, women have 40% less saved in their 401(k) accounts compared to men. This gap can be attributed to factors like lower wages, fewer years in the workforce, and interruptions in careers for care giving responsibilities. This results in less retirement savings and fewer employer contributions.
- Career Interruptions: Women are more likely to take career breaks to care for children or aging parents. These interruptions mean fewer years of earning and contributing to retirement plans, leading to lower lifetime savings and reduced Social Security benefits. This makes having a well-thought-out investment and savings plan crucial.
- At Finomenon Investments, we advise on workplace benefits and compensation and provide consultation and feedback on how to plan these key events.
- Higher Healthcare Costs: Women spend 20% more per year on out-of-pocket health costs. Due to longer lifespans, women tend to spend more on healthcare in retirement, estimated to be an average of $150,000 more on healthcare over their lifetimes compared to men. This makes it essential for women to plan for higher medical costs as part of their retirement strategy.
- Greater Risk Aversion: Women are more risk averse than men on average — at least that’s what research suggests. While this can protect against short-term volatility, it may also reduce long-term growth potential. Striking a balance between safety and growth by understanding your risk profile is essential.
These factors highlight why personalized financial planning is particularly crucial for women to ensure they can build and preserve wealth, manage risks, and maintain financial security through longer retirements.
How To Stay Proactive
1. Earnings
- Negotiate salaries proactively and set clear expectations at work to help increase lifetime earnings.
- Diversify income sources by exploring side hustles or passive income investments.
- Utilize employer-sponsored benefits like matching contributions and stock options.
- Start investing as soon as possible to capitalize on compound growth.
2. Longer Life Expectancy
- Begin saving early to ensure you have enough for an extended retirement.
- Establish a sustainable withdrawal strategy to make your savings last throughout retirement.
- Account for rising healthcare costs by contributing to HSAs or purchasing long-term care
- Maintain a balanced portfolio that supports both growth and longevity while managing risks.
3. 401(k) Balances
- Maximize retirement contributions each year to grow your 401(k) balance.
- Take advantage of catch-up contributions if you’re 50 or older to boost savings.
- Contribute to a spousal IRA if not employed full-time to continue building retirement funds.
- Review your asset allocation regularly to ensure optimal growth in your retirement accounts.
- Ensure you’re contributing enough to get the full employer match in your 401(k).
4. Career Interruptions
- Plan for career breaks when possible by maintaining emergency savings and cash flows.
- Increase retirement savings both before and after career breaks to compensate for lost time. Bonus, RSU etc can provide a boost in your retirement fund allocation.
- Leverage spousal benefits if available for health insurance and retirement contributions while taking time off.
5. Higher Healthcare Costs
- Contribute to an HSA to save for healthcare costs in a tax-advantaged way.
- Evaluate long-term care insurance to cover potential future medical expenses.
- Plan for inflation in healthcare when calculating your retirement savings needs.
- Optimize your Medicare options to minimize out-of-pocket healthcare expenses.
6. Greater Risk Aversion
- Regularly re-balance your portfolio to ensure it remains aligned with your goals without becoming overly conservative.
- Diversify your investments to reduce risk while maintaining potential for growth.
- Educate yourself about risk to feel more comfortable taking calculated investment steps.
- Adopt a long-term view to focus on time in the market, not timing the market.
- Work with an a fee only fiduciary advisor to develop a personalized plan within your unique risk tolerance and goals.
As financial disparities between genders become more apparent, it’s crucial for financial institutions and employers to reassess and improve their support for women investors. Taking a proactive approach to addressing these gaps can reduce the financial burden women face, promote equality in wealth-building opportunities, and empower women to achieve long-term financial security.
At Finomenon Investments, an inclusive strategy is key to building a client obsessed family office. These strategies are key to financial planning and managing investments for women, we proudly serve women executives and leaders working in both tech and non-tech companies based in Seattle area.
Ready to start? Contact Shabrish and take the first step towards making the change.
Disclaimer: Nothing here should be considered an investment advice. All investment carry risks, including possible loss of principal and fluctuation in value. Finomenon Investments LLC cannot guarantee future financial results.
