Financial planning is incredibly important for women. According to Pew Research, 90 percent of women will be the sole financial decision makers for their households at some point in their lives. This change is happening due to a combination of factors impacting women today, including higher divorce rates, prolonged single lives and longer lifespans than men.When it comes to financial planning, women are also an underserved group that faces unique financial challenges. For example, 72 percent of women cite not feeling confident in making financial decisions on their own (according to a study by Fidelity). That’s why it’s essential for women to take control of their money and understand important issues, including preparing for retirement, investing and contingency planning.
Here are the 3 most important topics women should think about when focusing on their financial future.
1. New Social Security Changes in 2016
Planning for retirement is very important for women as they tend to live longer than men on average. Despite this fact, women have saved on average half of what men have saved, according to research from T. Rowe Price. Living longer and with less personal savings means that Social Security benefits will have to play a big role. But new changes announced in November and rolling out in 2016, could make that more difficult. One of these new Social Security changes takes away the ability to temporarily claim spousal benefits while waiting to file at the full retirement age of 66. Another new rule will also affect the ability to “file and suspend” and will now prevent the ability for family members to claim auxiliary benefits while the retiree postpones her benefits. Women at or close to retirement age should get informed about these new changes —they could dramatically affect how and when you may decide to file.
More information on the new changes can be found here.
Investing is one of the only ways to beat inflation. This becomes crucial, because money held in cash loses on average 2 percent per year due to inflation. The stock market, on the other hand, offers inflation-beating returns and improved odds. In fact, according to Warren Buffett, one of the most famous and successful value investors, “For the period 1950 to 2009, if you adjust the S&P 500 for inflation and account for dividends, the average annual return comes out to exactly 7.0 percent.” Despite the obvious benefit, only 18 percent of all savings are held in stocks and a shocking 63 percent is held in cash (BlackRock). While women may have the skills, many lack the confidence to be great investors. Some studies show women are better than men when it comes to investing—if they’re educated in the stock market. Getting educated and having the right methodology and tools are just some of the ways women can gain confidence and become fearless investors. I can personally attest to this: I started investing in stocks on my own for the first time in 2012, at age 60.I now host presentations on how to invest in the stock market with confidence and have helped thousands of other women get started.
3. Unexpected Life Events
A commonly overlooked financial concern for all women is planning for unexpected life events. Known as, “contingency planning,” this includes things like sudden death, divorce, illness, loss of employment, and inheritance — all of which demand serious financial decision-making. How do you plan for something you don’t expect to happen? The simplest solution is getting involved in personal finances now so you won’t be blindsided in the future. Whether facing a sudden financial loss or financial gain, with the right knowledge, you can weather all storms. It’s also important to build an emergency cash reserve to keep you afloat for at least six months. You should also open up communication with family members so that you share important information like passwords, bank accounts, financial statements, and where to locate other important documents. Having a plan in place makes it easier to handle unexpected life events.
To learn more about how to handle these financial issues, I invite women to attend the upcoming multi-speaker event I will be holding with optionMONSTER, Women, Wealth, & Empowerment, where a panel of seven savvy speakers will address financial issues like retirement, investing, contingency planning, and much more.
Sandy Chaikin is a member of the DailyWorth Connect program. Read more about the program here.