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Wealth & Well-Being

How Financial Life Planning is Different for Women, Part I: The Financial Differences

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On the surface, it may look like women face many of the same financial life planning concerns as men, such as managing debt and assets and saving enough for retirement while living a meaningful life that aligns with their core values. But financial life planning for women is very different. Not only do they face unique financial challenges, but their behavior and values are different, as well. 

At the heart of it, financial life planning is about aligning your spending habits with what is most important to you. It’s about utilizing your assets to live an authentic life that you feel good about day in and day out. 

Intrinsically, money has no value. But money can bring happiness and meaning to your life if used wisely and maximized through good financial life planning. Naturally, then, key financial and behavioral differences will make planning for women unique.  

 Financial Differences

  1. Longer Life Expectancies and a High Probability of Ending Up On One’s Own

Here are some astonishing facts you may not be aware of:

  • On average, women live six to eight years longer than men.
  • Nearly 50% of all marriages end up in divorce.
  • 8 out of every 10 women will end up on one’s own due to death or divorce.

Longer life expectancies mean women need to plan for longer spending periods in retirement, which involves building heftier savings accounts or making more aggressive investment decisions to build a nest egg that will adequately cover expenses. 

Living longer also means planning for higher lifetime healthcare costs. Rising healthcare costs are a concern for both genders, especially considering the many expenses Medicare doesn’t cover. But for women who have longer life expectancies, it’s even more important to have a long-term care plan in place.

The sobering fact that the majority of women will end up alone means they need to know how to take care of their own finances should they find themselves in this position. Too often we meet women caught up in the most tumultuous events of their life—the loss of a spouse or divorce—who have no idea about the state of their finances. This only adds to the stress and confusion of an already difficult time.

  1. Gender Wage Gap

Did you know that, on average, women only make between $0.78 and $0.80 for every $1 men earn? And this is just the average pay gap, this number is even less for some demographics.

This cents-on-the-dollar difference adds up. Not only does this gap diminish a woman’s saving and investing power, but also negatively affects her social security benefit amount. As a result, many women must make more aggressive investment decisions later in life to accelerate their retirement savings and/or make the decision whether to claim her spouse’s, ex-spouse’s, or her own social security benefits.

  1. Fewer Earning Years 

Women are less likely to have a steady income stream over the course of their lifetimes. Responsibilities such as child-rearing and caring for elderly parents cause women to move in and out of the workforce more frequently than men. Typically, men’s careers are virtually uninterrupted allowing them to earn, save, and increase their retirement contributions year after year.

A woman with caretaking responsibilities is not afforded that same benefit. Due to fewer continuous working years, she is unable to contribute as much to her retirement. She is also less likely to hit the same “high-earning” years stride as a male can, which will decrease her social security benefit amount. 

These three differences compound on one another to make financial life planning a bit more complex. Women have less time to earn and save all while struggling to find a work-life balance and live a life of meaning. 

In the next article in this series, we will be taking a look at the behavioral differences that affect financial life planning for women. We promise, there is good news you won’t want to miss in this next one. Even though women face financial disadvantages, they are disadvantages that their behavioral tendencies can help them to overcome.

Written by Rachel DeCarolis in collaboration with Lexicon Content Development

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