Women’s financial planning often takes a back seat to the many priorities we juggle daily. What’s worse, a woman's financial plan is often incomplete because we don’t fully address three unique financial challenges women face. By planning for these three situations, your financial plan will be more effective in securing your future.
1. Longer Life Expectancy and Increased Healthcare Costs
Retirement planning is essential, but healthcare is likely to be the largest expense women face in retirement due to our extended life spans. Planning for healthcare costs—beyond general retirement savings—is a critical step to prepare for this phase of life.
Strategic Action: Integrating Long-Term Care into Your Financial Plan
Explore LTC Insurance Early: Long-Term Care (LTC) insurance is one of the most effective ways to manage potential healthcare expenses in later years. Begin researching LTC insurance options in your 40s or 50s, when premiums are generally lower and health requirements are easier to meet.
Consider a Dedicated Healthcare Fund: If insurance alone doesn’t meet your needs, consider setting up a dedicated investment account to cover future healthcare expenses, ensuring these costs won’t erode your retirement savings.
2. Career Interruptions for Family Care
Many women take career breaks to care for children or loved ones, and while these pauses are often rewarding, they can have a substantial impact on long-term financial security. Career breaks reduce lifetime earnings, affect Social Security benefits, and often shift long-term career trajectories.
Strategic Action: Create a “Pause/Break Fund”
Define Your Financial Cushion: Estimate the amount you’ll need to cover living expenses, retirement contributions, and professional development during your break.
Set Up Automated Contributions to a High-Yield Savings Account (HYSA): Automating contributions can build your fund steadily while earning interest. This “pause fund” minimizes the financial impact of a career break and can smooth re-entry to the workforce when the time comes.
3. The Gender Pay Gap
The gender pay gap remains a significant obstacle, costing women thousands in lifetime earnings. The National Women’s Law Center estimates that women lose around $406,280 over a 40-year career due to pay inequality—an even greater amount for Latina and Black women. While we work toward closing the gap, taking proactive steps now can help minimize its impact on our financial future.
Strategic Action: Build Wealth by Growing Your Net Worth, Not Just Your Salary
Focus on Wealth-Building: Salary caps and promotion ceilings can be beyond our control, but how we manage money is fully within our control. Maximize your net worth by capitalizing on stock options, profit-sharing, and retirement contributions.
Diversify into Additional Investments: Beyond retirement accounts, consider opening a taxable investment account for additional investing, and explore other wealth-building opportunities, like real estate. Prioritizing your net worth gives you greater financial security and flexibility in the long term.
Conclusion
Women often face unique obstacles in financial planning. By addressing these three situations, you’ll ensure that your financial plan is complete and more effective in securing your future.