Planning · March 10, 2022

Financial Headwinds Unique to Women and How to Overcome Them

In recent years, women have become more comfortable having discussions with their friends and families about their financial situations—how much they earn, how much they have in their retirement accounts and other ways they're working to increase their wealth.


However, there's still a long way to go before these conversations truly become normal.

There's good reason for women to keep talking with one another about finances because doing so can help solve financial issues that are unique to women. These issues include the gender wage gap, women's longevity compared to men's, more regular stints out of the workforce and caregiving needs for aging parents.

In this article, we'll discuss those financial headwinds unique to women and some ways to overcome them.

How women's financial needs differ from men's

When it comes to financial security, it's important for women to fully understand what their financial hurdles may be. It's also equally important that the men in their lives—husbands or partners, fathers, brothers and sons—understand those hurdles, too.

Women tend to live longer

On average, women live approximately 5 years longer than men. With a longer life expectancy, women need to consider a few extra things in their financial plan.

  • Make their retirement dollars stretch further
  • Plan for some type of long-term care event, as well as the increased cost of healthcare in general
  • Prepare to dispose the marital estate, as many married women will outlive their male partners and will bear that responsibility

Women have less savings due to earning less over their lives

Because women tend to earn less over their working lives, they tend to have less in their retirement and savings accounts when they reach retirement age. Data from the Census shows that US women earn about 30% less than their male counterparts, and that gap increases with age.

There can also be a tendency among businesses owned by women to charge under the market value for their products and services, too. Similarly to employer wages, this leads to fewer retirement funds overall.

Given we just discussed how women need to make their retirement savings last longer due to longer lifespans, you can see the dilemma. With a smaller financial cushion, women can be more vulnerable to unexpected economic life events, like a job loss or divorce.

Caregiving typically falls to women

According to a 2020 study, about 53 million Americans provide unpaid care to a family member, 61% of which are women . In many cases, providing care for a family member means only being able to work part time or leave the workforce entirely. As caregiving tends to fall to women, this reduction or cessation of work can have significant financial impacts, including:

  • Reduction or loss of income, employer-sponsored healthcare, retirement benefits and other employee benefits
  • Fewer savings
  • Potentially lower Social Security benefits in retirement
  • Challenges in career advancement, and therefore earnings potential, or challenges reentering the workforce
  • Reduced ability to weather a financial hardship in the event of a divorce or death of a spouse

Women tend to live alone

Through common circumstance such as by choice, divorce or death of a spouse, a growing number of women are living alone. That's especially true towards the end of a woman's life when her spouse is more likely to have predeceased her. Overall, this means women will have sole responsibility for protecting their assets and making financial choices on their own.

Getting women into the financial driver's seat

Given the headwinds women face for their financial wellbeing, there are many reasons to encourage women to put themselves in the driver's seat of their financial lives. While more and more women are taking control of their financial wellbeing in recent years, there's still more work to be done.

In this next section, we'll discuss steps women can take to overcome their financial headwinds and gain control of their full financial picture.

Understand your cash flows

Creating a cash flow plan or a budget is an essential step in staying in control of your finances. Everyone should have a strong understanding of how much they have on the assets side of their balance sheet (income, savings and investments), how much they have on the liabilities side (monthly expenses, taxes, etc.) and how much credit they have available to help them bridge any gap between the two. Having a good grip on your household budget along with your significant other, if you have one, is a great place to start.

Build your confidence in investing

Whether you have only a 401(k) account with your employer or have dipped your toes into trading through a brokerage account, having a solid understanding of investing concepts like risk tolerance, diversification, inflation and asset classes can help you feel more comfortable when deciding what types of investment accounts are right for you. Sitting down with your financial partner to get a full view of where and in what your money is invested can give you a good starting spot from which to learn more.

Estimate your retirement income needs

Women need more in retirement due to their longer life expectancy, but challenges like the gender wage gap and less time in the workforce apply downward pressure to women's retirement savings accounts.

To get an understanding of how much you'll need in retirement, a calculator where you enter your goal retirement age, what percentage of your current income you may need, and how much you'll get from Social Security can be useful.

For a more in-depth dive into your retirement income needs, weigh when you should start taking Social Security benefits, as well as plan for higher healthcare costs. Remember, the earlier you start to save for retirement, the better off you'll be long-term.

Build an asset protection plan

Whether you run your own business or work for an employer, you have assets that need protecting. Those may include your retirement and other investment accounts, physical property, your family and yourself.

To build an asset protection plan, you'll need to identify your potential risk exposure and determine how you can reduce that exposure. For example, disability insurance can help cover the cost of care in the event you are unable to work due to disability.

Advocate for yourself at home and at work

We recognize that everyone's situation is different, but here are a few suggestions to help you advocate for yourself whether you're at home or work:

  • If you and your partner both work, make sure your partner is equally invested in responsibilities at home to include home upkeep and childcare.
  • If you're out of the workforce temporarily to raise children or care for aging relatives, try to keep your skills up to date to remain competitive when reentering the workforce.
  • If you're caring for disabled or aging family, be sure to ask for help from adult siblings or family. If those options aren't available, check for external providers and support groups.
  • Whether you've been in the same position for years or are looking for a new opportunity, always do the market research to determine what a fair salary for your experience is.
  • If you're a business owner, try networking for new business opportunities or new learnings to take back to your company.

A financial professional can bring the full picture together

Women are their own best advocates in everything they do, and that includes having a better understanding of their financial situation. But we must also recognize that financial planning isn't always easy or convenient to do on one's own, especially when balancing the needs of work and home. In many cases, women, as well as their partners, can benefit from working with a professional who can help them make their money go to work for them, especially in the face of so many headwinds.

If you're looking for help to best plan how you'll overcome the unique financial headwinds women face, connect with a First Citizens financial professional today.

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