Why accomplished women shouldn’t ignore financial planning, and how to get started

There’s an old saying in the financial industry–women save, men invest. Unfortunately, in this case, there is some truth to the stereotype. Studies across the board show that women invest less than men and as a result, they lag in retirement savings by comparison. 

That precedent is changing, though. Thanks in part to the pandemic, more women than ever are getting into the driver’s seat when it comes to investing. According to Nationwide, 83% of women have developed new strategies to generate retirement income in the wake of COVID-19. 

While that’s great news, there’s still more work to be done. Fortunately, it’s never too late for women to get excited about—and take control of—their financial futures. 

Why women put off investing

First, let’s look at the why behind the trends. Why do women—even highly successful ones—tend to shy away from long-term financial planning and investing? Do any of the following sound like you?

Investing is boring and/or stressful 

We’ve heard it first-hand through talking with our female clients and prospects—they find investments boring. It’s not surprising, when you consider the financial fine print and confusing jargon used by big brokerage firms. 

It doesn’t help that there are fewer visible women in the investment space. Women and men need to plan differently, and when you hear someone talking at you about things that seem like they don’t matter to you, you’re more likely to tune out.

Women also experience more anxiety around investing. A 2022 study from Goldman Sachs revealed 63% of women feel anxiety or stress around managing their retirement investments (compared with 52% of men).

Investing feels risky 

Women tend to be more risk averse than men, stashing away their money into savings and other “safe” investments. Men, on the other hand, are more likely to try to grow their money at a faster rate.

Confidence—or lack thereof—contributes to females’ conservative outlook on building wealth. Men consistently report more investing confidence than women. But take note: when women do invest, their portfolios often outperform men’s, thanks to a more thoughtful approach.   

So, even though saving may feel less risky than investing, you end up missing out on growth opportunities. We’ll prove it in the next section. 

I earn well, so I’m not worried about it

There seems to be an assumption among high earners (whether self-employed or climbing the corporate ladder) that income in retirement simply won’t be an issue. For example, let’s say you’re a lawyer earning upwards of $1M a year—you’re living well and putting away cash in savings. You can afford everything you need and more. So there’s no reason to think you won’t be fine later on, right? Well, not exactly. 

Let’s do the math. If you put $50,000 in a high-yield savings account with an interest rate of 3%, your savings balance would be $51,500 after one year. 

Now imagine you put another $50,000 into a moderate risk investment portfolio with an expected annual return of 6%. After the first year, your investment would be worth $53,000. Not a huge difference. But over the long-term, it’s another story.

After 20 years, your high-interest savings account balance would be $90,305.56. The money in the investment account? It would be worth $160,356.77. And that’s if you never added another dime to the initial $50K investment. Now imagine the possibilities if you added to that account on a monthly basis! That’s the beauty of compounding interest.

I plan to work until I’m 65, 70…or longer

When you love what you do, it makes sense you’ll want to keep doing it as long as possible. But as much as we’d like to, no one can predict the future. The Goldman Sachs report mentioned above notes more than 60% of women retired earlier than planned. Most often, this was due to uncontrollable factors, like health problems or taking care of a family member.

Aside from that, you may simply decide later in life that you don’t want to keep working. You could face burnout, layoffs, or take a midlife gap year that turns into more. Whatever the reason, retiring earlier than planned means your savings need to last longer than expected. And many women aren’t prepared for that.  

Even without early retirement, women need to factor in extra costs later in life. Women live, on average, five years longer than men, which means they have a longer retirement planning period to finance, and are more likely to need long-term care than men. 

I’ll let my partner handle it

Whether it’s a current relationship or a hope for the future, many women still prefer to leave the financial planning and investment decisions to their partner. Women overwhelmingly take the lead when it comes to managing everyday household expenses—as much as 85%, found UBS. Yet only 23% did so in terms of long-term money management. 

While it may seem convenient, deferring long-term financial planning to your partner is financially risky. If you split or your spouse dies, where does that leave you?

Paving the road to a secure future for women 

Know where you stand 

The first step to getting on track is to understand your current position. Because how can you get where you want to go if you don’t know where you are? Sit down, grab a calculator, and get  current numbers for your: 

• Monthly income and spending estimates
• Savings account balance
• Balances of all retirement account(s) including IRAs, 401(k)s, and investment portfolio
• Emergency fund (it should be enough to cover 3-6 months of expenses)
• Value of assets such as your home and other real estate
• Any outstanding mortgage balance (or other loan/debt) 

Don’t worry about getting this accounting perfect—estimates are fine to start. The goal here is to gain a baseline understanding of your financial starting point.. This information will help you see what’s flowing in and going out and give you a snapshot of your total net worth.  

Identify your goals 

One thing’s for sure, people with clear financial goals retire with more. But the specific number that works for you will depend on the type of lifestyle you’re used to, and how you want to live in retirement. That’s where goal-setting comes in. 

Aside from the numbers, consider your lifestyle goals for retirement. Maybe you want to travel, move abroad, or have money to pursue new hobbies. Perhaps you want to retire earlier than 67? Or, shift into a “semi retirement” involving lower paid, but more meaningful work.

Some of your goals may involve helping your loved ones; women often find themselves taking time off to care for an aging parent or helping adult children find their financial footing. 

Your dreams for retirement may change later on, and that’s okay. A financial plan is meant to evolve over time, just like you. 

Develop a plan for success

Even the most well-informed make financial mistakes—and “winging it” is one of the biggest. You invest in your career or business growth with intentionality, as well as your financial literacy. You plan ahead, set performance goals and measure results—why not take the same responsibility and ownership for your money? 

Having a plan for short- and long-term investing goals will help you make smarter, more intentional financial decisions and lead to greater wealth in the long run. In a 2021 study of women and investing, 71% of women said they felt more confident about retirement after having set up a financial plan.

Go For Expertise 

Just like seeking expert help can speed up business growth and ensure smoother operations, it pays to seek professional advice about your financial plan. Working with a financial wealth advisor takes the heavy lifting off your plate, ultimately saving you time, stress, and worry. 

A financial advisor, especially one with a CERTIFIED FINANCIAL PLANNER™ designation, will support you in calculating your current position, setting goals, and preparing a plan. And, they will work with you to adjust those plans over time to account for changing priorities. 

Often, the best way to get started with your financial plan is with a phone call. When working with prospective clients, we listen first and ask the clarifying questions to understand what your existing numbers mean for your goals. Then, we’ll discuss strategies that may make sense to prepare you for financial independence.

If you decide to work with us,  our financial advisors will help you create a detailed plan covering everything from retirement investments and taxes to estate planning and getting the right insurance. And since we are a fee-only, fiduciary firm, you can trust that your best interests are our top priority.  

Work with a team that understands the unique financial needs and wants of successful women. The majority of our Senior Advisors are women, and every advisor benefits from their expertise and insights when it comes to your wealth. Contact us to schedule a free consultation about your financial future. 

Sources: 

https://nationwidefinancial.com/media/pdf/NFM-21742AO.pdf 

https://www.gsam.com/content/gsam/global/en/market-insights/gsam-insights/2022/women-retirement.html 

https://www.ubs.com/global/en/media/display-page-ndp/en-20190306-financial-security.html 

https://www.financialeducatorscouncil.org/financial-illiteracy-costs/ 

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021.pdf 

https://www.fidelity.com/viewpoints/retirement/spending-in-retirement 

https://www.financialeducatorscouncil.org/financial-illiteracy-costs/