As a female Financial Advisor, I know firsthand how women face different economic challenges than men. Not only am I a working professional, I’m also the mother of 3 beautiful children and realize how crucial my time is with them while they’re young. For many mothers, that often translates into spending part of their earning years out of the traditional workforce to take care of their children. And yes, there are some men who have embraced this role as well, but by and large it’s still primarily viewed as the mother’s job to stay home with children in their early years.
I recently had the opportunity to sit down for an interview with NBC’s consumer reporter Emily Volz to discuss how COVID has affected women economically and how they can navigate the pandemic. Jeff has been gracious enough to turn this week’s column over to me, so this week I’d like to review a few of the key items that Emily and I discussed here.
As the pandemic swept across the US and the world it has impacted us all, but women face some additional unique financial challenges. As more women have entered the workforce and become business owners over the past fifty years, they are now playing an indispensable role in the financial success of families, communities, and the country as a whole.
But unfortunately, the pandemic has presented some significant financial difficulties for women. Since the onset of the pandemic in February through October of 2020, over 2 million women left the workforce. In general, women have experienced disproportionate negative effects due to their large role in social sector industries such as retail, hospitality, and tourism, which have essentially been decimated by the pandemic. Even as jobs returned over the summer after the first shutdown, women worldwide returned to work at a slower pace than their male counterparts. The pandemic has also created a crisis in the childcare industry with a loss of availability and for many, increased costs for care. Women are still more likely to take on the role of childcare and remain out of the traditional workforce to carry out that role.
So what can women do to give themselves a leg up? Well, first and foremost, women need to acknowledge the financial challenges they face and then take proactive steps to protect their financial futures. Regardless of their family structure, women should be actively involved in planning and understanding their financial lives, both long term and on a day-to-day basis.
Currently, surveys show only 15% of adult women have a written retirement strategy. To me, this figure is way too low! Because women tend to live longer, they need to save more for retirement and plan for the likelihood they will spend part of retirement living alone. It is critical for women to have a sense of how much money they will need in retirement, including those years when they may be living solo.
To achieve a comfortable retirement, women must place themselves first. While they often take on the role of care givers, they need to keep a sound perspective, particularly with respect to their adult children. For example, on average empty nesters provide over $250 a month to help financially support their adult children. With my oldest home from college due to COVID, I understand how the maternal instincts kick in to want to help our children but women need to avoid draining their retirement savings regardless of the circumstances. If they really want to help their families, they might be better off offering things like budgeting advice or job search assistance.
Currently, the average retirement savings for women in the US is $23,000, while they expect to need something closer to $500,000 to retire comfortably. This is a big discrepancy and needs to be addressed. To reach retirement goals, I believe that they should save at least 10 to 15 percent of their paycheck in some sort of employment retirement plan such as their 401k or SEP. If they have access to 401k through their employer, even if they can’t immediately reach that savings goal, they should at least be taking advantage of any type of employer matching. The match is free money afterall! For women that don’t work in the traditional workplace you can still contribute to an individual brokerage account or an IRA if you file a joint tax return with a spouse. This allows you to contribute up to $6,000 a year or $7,000 a year if you are over age 50.
A significant number of women expect Social Security to be their primary source of income during retirement. Part of successful retirement planning should therefore include a strategy on when and how to file for Social Security. One thing to consider might be to delay the start date of payments, as they can increase the monthly benefit you receive each year until age 70. Typically, Social Security payments can start age 62 but the later you wait to file, the more your benefit amount can increase.
It’s possible that the pandemic may bring further stimulus payments. For those who are able, any stimulus should go to paying down high interest debt and creating an emergency fund of three to six months of income if they don’t already have one in place.
As you can see, the financial challenges that women face are not all caused by the pandemic. However, it has certainly reinforced the need for women to actively plan for retirement by taking control of your money, putting yourself first, building your retirement nest egg, and having a Social Security strategy. And that is why we teach folks the importance of implementing a sound retirement system.
So to all you women caregivers – be vigilant and stay alert, because you deserve more!
Have a great week.
Jen Farrington, Ph.D. is an Investment Advisor Representative at Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, Mansfield. Jen can be reached at email@example.com.
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