Women can take steps to ensure a higher likelihood of reaching financial peace throughout their retirement years. Unfortunately, for many women the deck is stacked against them. A review of the typical obstacles and potential solutions can greatly improve the probability of success.
Lower pay, increased longevity, lower financial risk tolerance and lack of acceptable resources contribute to a lower expectancy of financial success. Some obstacles are easily changed while others persist. Lower income levels are typically out of the woman’s direct control today; let’s address choices women can take now which will increase the likelihood of financial peace.
Women typically live longer. Most would consider this a blessing, provided the extended time is lived in a healthy and happy environment. The blessing of a longer life creates the need for greater resources. The most obvious cost is the financial burden of funding more years. Additional costs include the likelihood of higher medical expenses and the potential need of assistance in later years. The costs of increased longevity are an obstacle that can and should be addressed today. This concern is easily addressed when creating a financial plan. A financial plan with the proper life expectancy –typically into her nineties – will calculate the likelihood of running out of money. With this knowledge, choices can be made which increase the likelihood of success.
Men tend to be more aggressive in all areas of life; which can be a curse or benefit. Aggressive financial behavior often translates to a higher equity (stock) allocation which over a long time horizon has historically increased the value of retirement assets. Financial aggression is a curse when the drive to win overshadows proven investment philosophy. Understanding when to be aggressive and when to be conservative is a difficult balance. Basing financial decisions on financial goals rather than emotions or assumptions contribute to a higher probability of a successful outcome.
Seeking guidance from trusted financial resources is a solution that can be implemented immediately with positive results. The operative word in the previous sentence is trusted. Studies show women feel slighted, ignored or “sold to” when dealing with financial professionals. Historically, the financial services profession has been male dominated and sales based. Both biases are changing. The shift towards financial planning – which is holistic in nature – will help women understand their financial position and feel better served in the process. Although the media tends to focus on the likes of Bernie Madoff, there are many trusted financial professionals with the woman’s best interest at heart.
A woman’s potential for success and the choices available are specific to her needs and wants. There is no magic solution. However, an increased understanding of her current situation and knowledge of the steps needed to achieve success will minimize the potential shortfall. Take action today to ensure the best chance of enjoying financial freedom throughout retirement years.