Women and Money (Part 2)
By: Elaine E. Bedel, CFP
Bedel Financial Consulting
Women and Financial Planning Issues
Do men and women differ in their financial planning needs? The answer is “no”. Both need to address all the financial aspects of planning, but like any two people, individual needs, goals, and strategies will shape the resulting action plan. The role that a woman takes in life, along with the aspect of living longer, can impact various areas of planning.
Women need to address all the following financial aspects of planning, taking into consideration their individual needs and lifetime goals:
- Life Insurance. The purpose of life insurance is to meet the needs of dependents. We generally emphasis the use of life insurance to replace the income that is lost to a family with the death of a spouse or parent. However, many times the need to replace services is overlooked. For example, the need to replace the services of a “stay-at-home” parent can put a financial burden on the family. As a result, even women who do not provide income to the family may need life insurance.
- Disability Insurance. If your earned income is necessary to provide for yourself or your family, you should have disability coverage. The need for sufficient disability insurance may be more important than life insurance. This is especially true for single women. Data indicates that one-third of the population will have a disability that requires stopping work for at least ninety days sometime before age 65. Also, almost 50% of the mortgage foreclosures are a result of disability. In the event you are no longer able to earn an income and have no disability income available, your needs must be met from existing investments. Tapping your investments to meet living expenses during your pre-retirement years can significantly impact your ability to achieve financial security at your desired age.
- Long-term Care Coverage. Because women live longer, it is more likely they will need custodial care in their older years. Studies have indicated that 50% of women will utilize the services of a nursing home for some period of time after they retire. By contrast, only one out of three men is expected to need long-term care.
- Retirement Planning. The combination of lower earnings, interrupted careers, and living longer generally means women may need to work longer and save more to provide for their retirement. As a result, it is even more important for women to begin to save early in their careers. Taking advantage of pre-tax retirement plans should be your first priority.
- Estate Planning. Everyone needs a will document to assure their assets are distributed based on their wishes. Women may procrastinate in this area, especially if they have no children. However, a will or trust document is the only means of assuring that your favorite charities, family members, or friends receive the assets that you intended for them.
- Investments. Women, like men, need to create an investment plan with an asset allocation that considers the time period available for investing and diversification issues. Women tend to consider and plan for the contingency needs of children and parents and, therefore, may have more money held in money market or easily accessible funds. Being less aggressive with investments can result in less of a nest egg in the future. And, given the longer life expectancy, women need to consider the impact of inflation on the purchasing power of their portfolio and plan accordingly.
Click here to read the first part of this two-part series.
Women need to be knowledgeable of the family finances and prepared to either make decisions or seek the professional advice necessary to assist them. Married women who choose to leave financial decisions solely to their husbands are at a disadvantage when they either divorce or become widowed. As single women, neglecting the money management aspect of their lives will prove disastrous in later years. Being involved and becoming knowledgeable of the family finances will allow women to be more confident in making decisions and, therefore, more in control of their financial futures.
Elaine E. Bedel, CFP®, is president of Bedel Financial Consulting, Inc., a wealth management firm providing fee-only financial planning and investment management services for individuals, consulting services for corporate retirement plans, and investment advisory for institutions and endowments. She is the author of “Advice You Never Asked For…But wished you had!” available on Amazon.com. For more information, visit their website at www.BedelFinancial.com or email to firstname.lastname@example.org.
Copyright © 2011 Bedel Financial Consulting, Inc. All rights reserved.
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