Women & financial planning

Take advantage of potential financial challenges:

1. Take control by helping make the financial decisions at home.
2. Invest more to make up for potential retirement benefit discrepancies. Consider how much risk can be taken in exchange for the potential to earn higher returns.
3. Participate in employer plans by taking advantage of all possible company matches and tax-deferred contributions.
4. Do not depend on pensions or Social Security. The potential for fewer years in the work force and lower pay contribute to lower benefits for women.
5. Get out of debt. Understand how much you're spending and explore ways to reduce your expenses.
6. Do tax planning. Today, more women own homes and businesses and qualify for property tax deductions.
7. Keep your retirement top of mind. Statistically, women tend to live longer than men — plan to save 12% of your gross income for retirement.
8. Consider your insurance needs. Longer life expectancies, higher rates of disability and chronic health problems increase the need for long-term care offerings.
9. Use resources. Helpful financial information is easily accessible on the web and at public libraries.
10. Seek help by meeting with a qualified financial advisor.

Money milestones

When it comes to women and their money, there's a lot to celebrate. Women have achieved broad-based financial successes over the last few decades and continue to make impressive financial gains. Consider these statistics:

• Eighty-three percent of household purchasing decisions are made by women.¹
• By 2010 it is projected that women will manage 60% of the wealth in the United States.²
• Women own approximately 50% of the stock in the United States.³
• Of Americans with $500,000 or more in investable assets, 43% are women.³
• Of estates worth more than $5 million, 48% are owned by women.³

Women continue to enter the work force in record numbers. In 2006 59% of women 16 or older participated in the labor force and earned $1 trillion in annual wages.⁴ About one-third of working women are the primary breadwinners for their families.

Education is another area of increasing success, with women obtaining the majority of bachelor's and master's degrees today. The National Center for Education Statistics reported that women earned 59% of the bachelor's degrees and 61% of the master's degrees awarded during the 2007 – 08 school year.5 Continued increases are expected in the number of degrees awarded to women at all levels.

Women are also starting businesses at rapid rates — for the past two decades, women-owned firms have grown at twice the rate of all firms. The Center for Women's Business Research reports that 40% of all privately held firms are now majority women-owned, generating $1.9 trillion in sales.⁶

Financial challenges

Women have many money milestones to celebrate, yet still face a range of gender-specific financial challenges. One critical issue is the pay gap. In 2006 women earned 77 cents for every $1 earned by men. Although this gap is narrowing, over a lifetime it adds up to about $250,000 less in earnings for a woman to save and/or invest for her retirement.⁴

The greatest financial challenge may lie in the future, when millions of baby boomer women begin their retirement. Experts predict that many of the women retiring over the next 20 years will have less than one-third of the income necessary to retire comfortably. Why are women more likely than men to face serious financial shortfalls in retirement? The key reasons include:

• Longer lives — Women live longer than men and can expect to fund longer retirements. According to the U.S. Department of Labor, a female retiring at age 65 can expect to live another 19 years, three years longer than a male retiring at the same age.7 These longer retirements increase the chances of women outliving their savings and depending on Social Security benefits.
• Lower lifetime incomes and pension benefits — Women retirees receive about half the average pension benefits that men receive.8 This is partly due to the fact that many women work in part-time positions and tend to change jobs more frequently than men. In addition, the average woman is likely to spend approximately 12 years out of the workforce caring for children and elderly relatives.9 The average caregiver will lose nearly $660,000 in lifetime income due to caregiving.10 This reduces her lifetime earnings and retirement savings, and impacts her ability to vest in a pension or pay into Social Security.
• Living alone — Women are increasingly living alone: A third of women who become widowed are younger than age 60, and half of all women who will become widowed become so by age 65.11 Women without personal savings often find their survivor pensions drastically reduced by the loss of a spouse. Only 21% of widows receive survivor pensions from their husband's benefits, and the average widow receives less than half the Social Security benefits of a married couple.12 Yet few women take steps to prepare for the loss of a spouse and the financial consequences of living alone.

Despite these hurdles, women can take control of their finances, plan for comfortable retirements and help to ensure their future economic security. Financial planning is one proven strategy that empowers women to address unique money issues, reach financial goals and work towards achieving dreams.

How you can plan for financial success

One of the critical financial tasks of establishing a savings and investment plan is to build retirement assets. With professional financial advice, you can learn strategies for accumulating a substantial retirement nest egg while meeting your day-to-day money needs, attaining other savings goals and growing wealth. As a woman, you will need to consider your potential longer life expectancy and the impact of any time out of the work force as you set savings goals for retirement.

Retirement is also a time to consider the legacy you want to leave to loved ones and causes you care about. Your financial plan may include an estate plan that provides for future financial gifts to family members, friends and charities, and documents your wishes for the future.

No matter what age you are or stage of life you are in, working one-on-one with a financial advisor can help enable you to create a financial plan for attaining your personal goals, taking care of your loved ones and realizing your dreams. If you don't have a financial advisor, contact us at (800) AMERIPRISE or search for an advisor in your area.