Financial Tips for Women
Despite the fact that women earn less money than men, they generally need a larger retirement nest egg. On average, women live seven years longer than men and must finance more years in retirement. Although a woman may share her husband’s savings, those assets may be depleted quickly if he becomes ill and dies first, which is not unusual. And with 50% of marriages ending in divorce, most women are solely responsible for their finances at some point in their lives. Here are 10 ways women can overcome these financial challenges:
Take control
Most married women actively participate or take the leading role in managing family finances. However, some married women still leave the financial decision making to their spouse and may wind up ill-equipped to handle their finances if they divorce or outlive their husbands.
Invest more
To make up for discrepancies in retirement benefits, women should save aggressively. For example, a woman who takes seven years off from a 40-year career can expect to receive only half the pension benefits of someone with 40 years of uninterrupted services.
Know your risk tolerance
Consider how much risk you are willing to take in exchange for the potential to earn higher returns. Historically, equity investments have provided higher returns over the long term than less-risky investments, such as money market funds1. Keep in mind that investments that provide higher returns carry more risk. Always read the prospectus carefully before investing in a fund.
Participate in employer plans
Participate in all of your employer’s retirement plans, and take advantage of all possible company matches and tax-deferred2 contributions.
Do not depend on pensions or Social Security
Fewer years in the work force, fewer years with a single employer and lower pay all may contribute to a lower average pension and lower Social Security benefits for female retirees.
Get out of debt
First, understand your spending and reduce spending so you don’t continue to add to your debt. Then attack your existing debt by paying off high-rate debt first and, if possible, transferring high-rate debt to lower-rate credit cards.
Do tax planning
With more female business owners and more single women buying homes and qualifying for property tax deductions, tax planning is becoming an integral part of women’s financial lives. If possible, always contribute the maximum amount to your IRA and/or 401(k) and enhance your tax deductions.
Keep retirement top of mind
Although women have made many impressive strides toward financial independence, they report having only half as much for retirement as men. Generally, because women live longer than men, they should save 12% of their gross income for retirement, rather than just 10%.
Use resources
There is a wealth of helpful financial information easily accessible on the web and at your public library.
Seek help
Meet with a qualified financial advisor to create a financial plan specifically designed to help you reach your financial objectives.
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