By Paul S. McNulty, CFP®
Financial disadvantages disproportionately affect women in this country, regardless of marital status. Women do not invest nearly as much as men—40% less on average. (1) Women experience poverty at a higher rate than men, and women of color disproportionately live in poverty. (2)
How do women of any marital status take control of their finances? It’s not easy, especially since women make 81 cents for every dollar a man makes. (3) Women’s careers are also often interrupted by having children and caring for elderly parents, further widening the gender pay gap. And 56% of married women have their husbands handle finances for the household. (4) Let’s discuss a few financial planning strategies to get you on track to take control of your finances.
Develop A Retirement Plan
All women should have a retirement plan, yet one-fifth of women have nothing saved for retirement. (5) Look at any actuarial table, and it will tell you that women outlive men by five years, (6) so establishing a retirement fund should be a top priority. If you are working, max out your 401(k) or whatever plan your company offers. For 2021, the limits are $19,500 and $26,000 for those over 50. For IRAs, the limit is $6,000, with an additional $1,000 for those over 50. (7)
As stated above, women invest 40% less than men on average, an astounding statistic. The best time to start investing is now. Sitting out the stock market and waiting for the perfect moment to jump in means you are missing out on appreciation and compounding interest (the interest that’s paid on interest or dividends). Every time you receive a dividend and reinvest it, it only grows larger. Stocks are only one part of an investment plan; you should have a balanced asset allocation based on your goals, age, and risk tolerance. Risk tolerance takes a temperature of how willing you are to see fluctuations in the market. If seeing a stock drop makes you queasy, then a more conservative asset allocation may be appropriate.
Statistics show that women carry higher debt balances than men. Only 28% of women reported paying off their statement balance in full compared to 32% of men. (8) Women also hold 58% of student loan debt. Of the $929 billion in student loans outstanding, women owe almost $540 billion. (9) If you have a high interest rate, think about consolidating while rates are low. If you can make extra payments toward your loans, then do so.
You’re Not Alone
The stress and anxiety that accompanies finances is only amplified for single, divorced, and widowed women. And some of the odds are stacked against you. Working with a financial advisor can help you to get organized and create a plan to start saving for retirement, investing, and reducing debt. You don’t have to do it alone. You can overcome the odds and be financially confident in your future. We at Boston Metro Advisor are here to help. Contact us for a complimentary consultation by calling (781) 995-0253 or email me directly at [email protected].
Paul McNulty is the founder of Boston Metro Advisor with over 20 years of experience helping people navigate the ups and downs of the economy toward the financial future they envision. His education consists of a Bachelor of Science in business administration from the University of Rhode Island and the CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation.
Paul’s experience and education have made him a multi-faceted professional capable of assisting people with virtually all their financial needs. His services include every facet of retirement planning, from 401(k) rollover services and income planning to wealth management and estate planning. Paul has been active in his community over the years as a youth sports coach. When he’s not spending time with his wife, Cindy, and their two children, who are both recent college graduates, Paul enjoys reading, playing golf, and fishing. Learn more about Paul by connecting with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 591/2 may result in a 10% IRS penalty tax in addition to current income tax.