FROM YOUR 20S TO 70S: MY ONE FINANCIAL TAKEAWAY FOR ALL AGES
Today’s blog reminds me of all the amazing women in my life. My aunt. Friends, co-workers, colleagues. They prop me up, make me better. They also challenge me to do better, from relationships to goals, dreams to plans.
We women are in this together, especially in supporting one another to provide for ourselves, by ourselves. Statistics like these, however, remind me there’s work to do.
Women’s investment account balances lag behind men’s by up to 44% due to the gender pay gap.*
Add to that, women live longer than men, with 80% more likely to be impoverished in retirement.**
When it comes to financial literacy and the ability to maximize the financial resources we do have, we fall flat.
One reason? While we still are shouldering our unfair share of childcare and household duties, almost half of women (45%) in opposite-sex marriages earn as much as or more than their husbands, a share that’s tripled since the early 1970s. More than contributing financial “crumbs,” we are, in fact, breadwinners in many U.S. households.
Women hold more financial power than ever.
Despite workplace gains, women still need to account for several unique factors as they plan their financial futures, says Lorna Sabbia, head of Workplace Benefits at Bank of America. These include the likelihood that they won’t be paid as highly as their male counterparts, possible career breaks to care for family, higher healthcare costs and the probability of living longer in retirement. (The average lifespan is about five years longer for women than men in the U.S., according to Harvard Health.)
With all of this as our backstory, how do we move ahead?
20s and 30s
If I could shout this from the mountaintops to young women, I would: Start saving for retirement. I know, I know, it feels like climbing a mountain to convince a young 20-something, starting their careers, overwhelmed with student loans, that it will benefit them immensely in their later years to start retirement planning now.
How do you convince them?
Show them the money.
For example:
Let’s say you invest $75 a month into a retirement account from age 25 to 65. That’s a total of $36,000 over 40 years ($75 x 12 months a year x 40 years). Assuming a moderate 8% return, $36,000 can easily turn into $260,000 or more when invested in an individual retirement account (IRA), 401(k) plan or other retirement plans.
When $36,000 becomes $260,000, it’s easy to show them how money can work for you.
Takeaway: Start saving. It’s never too early.
40s and 50s
These two points of advice have to do with many women still being in the caregiver’s seat, or managing the daily needs of children and adult parents.
Think twice—and then think again!—about pulling money from a savings or retirement plan to help adult children financially.
Nearly half of financially supportive parents were helping pay for tuition or other school expenses, and 24% were helping pay off student loans. Remember, your child can take out loans for college and negotiate their repayment terms after graduation, but no one is going to lend you money to fund your retirement.Women are more likely than men to become caregivers of their parents or their spouse’s parents. Not only could this increased caregiving responsibility result in lost wages, but it also could necessitate early retirement.
Avoid burnout by circling the bandwagons. First, assess your current financial situation. Examine where you are financially and what, if anything, you are willing to compromise on to help care for an adult parent in need. Second, don’t be afraid to ask your family and a financial advisor for help to navigate these new waters, says Cynthia Hutchins, director of Financial Gerontology, Retirement Research and Insights, at Bank of America.
Takeaway: Avoid the temptation of feeling like you must take care of everyone, at any cost.
60s and Later Years
The light is at the end of the tunnel: your final years of work. While that’s certainly cause for celebration it also means you have only a few years left to contribute to retirement accounts.
At this point, contribute as much as possible to retirement accounts, like your 401(k), IRA, or other employer-sponsored plans.
Did you know? If you’re 50 or older, you can make catch-up contributions to your retirement account.
401(k)s: In 2024, the catch-up contribution limit for 401(k) plans is an additional $7,500 on top of the $23,000 regular contribution limit.
IRAs: In 2024, the catch-up contribution limit for IRAs is an additional $1,000 on top of the $7,000 regular contribution limit.
Also, consolidate retirement accounts from previous employers. Consolidating these accounts into one or two providers makes things easier for you, like monitoring your portfolios’ overall performance, and reduces or eliminates duplicate fees, resulting in cost savings and potentially higher investment returns.
Takeaway: Catch up, if necessary, and consolidate.
Whether you’re 21 or 71, you don’t have to go it alone. A financial professional can provide clarity and provide expertise and hold you accountable to reach your goals. Together, we’re our best advocates for one another’s achievements and financial successes. Contact Lindsey and her team today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
