Media Article Women in Transition: Navigating the Unique Financial Issues That Females Face

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Women in Transition: Navigating the Unique Financial Issues That Females Face

In a perfect world, gender distinctions would have little or no bearing on a person’s financial life. There would be no major discrepancy between the earning power of men and women, and as a result, women could go about the business of managing their financial lives much as men would.

 Because we live in a world where gender-based discrepancies in earning power, caregiving roles and other important areas are all too real, however, women must indeed confront financial issues that men may never have to face — money-related challenges that become especially evident at certain pivotal points in life. At the root of many of these challenges is pay inequity. Women outperform men in educational attainment, yet earn 81 cents for every dollar earned by men, according to Women Can’t Win, a 2018 report from the Georgetown University Center on Education and the Workforce. Women with the same college majors working in the same careers as men earn 92 cents for every dollar earned by men. What’s more, because women earn less on average and are far likelier than men to take time off their jobs for caregiving (of their children, ailing loved ones, etc.), they face a $1,055,000 cumulative lifetime earnings gap at retirement age, according to Women and Financial Wellness, a report from Merrill Lynch. 

Cindy Hounsell, president of the Women’s Institute for a Secure Retirement, sums up the situation in a blog post on the U.S. Social Security Administration website: “Women face unique financial challenges like longer life spans, the fact that we traditionally earn less than men, and differing employment patterns from men. Women are more likely to work part-time and spend time out of the paid workforce to care for loved ones. These all usually lower women’s Social Security benefits and overall savings.”

The most effective way for women to reckon with the realities of these financial gender dynamics is by preparing in advance, paying particular attention to life transitions, when these dynamics can have a more pronounced impact. Here’s a look at a handful of transitions that, for women, may require extra attention and planning, with suggestions from financial professionals on how to approach them:

Marriage: With a change in marital status come a variety of other potential changes — in tax status, in managing your personal finances, and more. To what extent will you and your new spouse combine finances? Would putting a prenuptial agreement in place prior to getting married be a wise move? For tax purposes, would it make more sense to file jointly or separately? These are questions that a couple should answer together, before they get married.

Another weighty question that women (but not men) often must answer for themselves is what to do about their surname: to take their spouse’s last name, keep their existing surname or come up with another alternative. If a name change is involved, women need to ensure their “new” name is legally connected to their previous name — that from an identity standpoint, relevant government agencies, financial institutions, employers and others recognize you’re still the same person, despite the name change. That means updating things like your Social Security card, driver’s license, bank accounts, mailing address, financial/investment/retirement accounts, deeds to property (home, auto, etc.) and insurance policies so they reflect your new name.

In updating all these, it’s critical to be consistent in the name you use — first, middle and last. Will you stick with your current middle name, use your maiden name as your new middle name, or use both and have two middle names? Will you hyphenate last names? Once you decide, be consistent with it, because any variance can lead to major bureaucratic red tape.

Having a child: The arrival of a baby raises all kinds of new issues with financial ramifications, chief among them the matter of childcare. While current law accommodates both maternity and paternity leave, women in many cases end up assuming a greater childcare responsibility than men do. In a 2018 report, The Financial Journey of Modern Parenting, Merrill Lynch found that after baby’s arrival, mothers are more likely than fathers to take a leave from work, switch to a job with more flexible hours or start working from home. When parents do take temporary leave, women take 10 times as much time away from work as men do. If one parent bears more of the load, especially in managing children’s schedules or caring for them when they are sick, it’s eight times more likely to be the mother.

All of which can have a considerable negative impact on a woman’s career track, earnings, Social Security benefits and retirement savings. “It can be a herculean task to make up for all that lost ground,” observes FPA member DeDe Jones, CFP®, who heads Innovative Financial in Lakewood, CO.

Before the baby’s arrival, she suggests that couples discuss in detail the interrelated financial issues that childcare raises, considering factors such as the current salaries, career trajectory, future earning potential and professional goals of each parent. How much leave is reasonable for each parent to take, based on financial needs as well as the desires of each parent and their employers’ leave policies? What’s the plan for returning to work? Will one parent stay home full-time to care for the child, and what are the ramifications of doing so? If both parents want (or need) to return to work, what are the options for childcare, and what are the costs associated with those options?

These are just a few of the questions that need to be answered. And the answers don’t necessarily have to keep with tradition, but rather should reflect the best interests of the family.

Caring for a loved one. Providing care to an ailing loved one often entails taking time off work, setting aside career priorities and, perhaps, sacrificing current as well as future earnings, along with workplace benefits and Social Security benefits. Usually it’s women who make these sacrifices, as about 75 percent of caregivers are female, and women are apt to spend as much as 50 percent more time providing care than males, according to the Family Caregiver Alliance.

Because they are likelier than men to be unpaid caregivers, women “need to be sure they take care of themselves and their own financial stability,” says former FPA Board member Catherine M. Seeber, a CERTIFIED FINANCIAL PLANNER™ professional in Lewes, DE.

That means committing to making consistent contributions to a retirement plan. It also means building a cash reserve from which they can withdraw to make up for lost income should they be drawn into a caregiving situation. If caregiving creates too much of a financial strain on a woman and her household, it’s important to explore other care options.

Divorce. A 2018 report from UBS found that 56 percent of married women leave investment and long-term financial planning decisions to their husbands. So when divorce strikes — as it does in almost half of all marriages — women may find themselves in the unfamiliar role of primary financial decision-maker.

In that role, there are some decisions they will have to make promptly during and after a divorce, and others they could — and perhaps should — put off until later. Seeber recommends that women enforce a “decision-free zone,” whereby, if they are indeed reckoning with financial issues that are new to them, that they table key post-divorce financial decisions for a period of months, to remove emotion from those decisions and allow themselves to settle into their new life, post-marriage. “Give yourself time to breath and surround yourself with people you trust,” suggests Jones, to get their input on certain decisions with which additional perspectives would be valuable.

Some of the biggest decisions have to do with managing Social Security, as a person is eligible to receive benefits on an ex-spouse's record. Given the complexities involved in Social Security claiming decisions and other financial decisions, such as what happens with the family home after a divorce, the advice and guidance of a financial professional can prove valuable, says Jones. To find one in your area, visit the Financial Planning Association’s searchable database of CERTIFIED FINANCIAL PLANNER™ professionals at

It is extremely important to have a re-design of your financial plan, since your current financial situation may have radically changed and your initial objectives were determined with your ex-spouse. Since there is less time to achieve and prepare to attain your objectives, it is important to regroup and redetermine those objectives based on today and how best to accomplish them.

Retirement planning. A woman reaching age 65 today can expect to live, on average, until age 86.7, compared to 84.3 for men, according to the U.S. Social Security Administration. A longer average lifespan means women need to focus on ensuring their financial nest egg lasts as long as they need it to, providing enough cash flow along the way.

Women therefore need to commit to setting aside enough money, via tax-favored retirement savings vehicles such as a 401(k), IRA and Roth IRA, to last through their retirement years, and to ensuring their nest egg will provide sufficient income — a retirement “paycheck” — to cover their expenses and support their lifestyle. Saving enough for retirement can be a more formidable challenge for women than it is for men, due to the aforementioned lifetime earnings gap.

An estimated 58 percent of women will need nursing home care at or after age 65, compared to 44 percent of men. That puts a premium on planning for how to pay for a potentially expensive long-term care need, whether it’s out of their own pocket or with some type of insurance, such as a long-term care insurance policy or a life insurance policy with a long-term care feature.

Spouse’s death. Here’s another pivotal point in life where the “decide not to decide” approach may apply. “Slow down and allow yourself some time to adjust to your new life,” suggests FPA member Kathleen T. Kenealy, a CERTIFIED FINANCIAL PLANNER™ professional based in Boston, MA. “Allow yourself time to grieve the loss you’ve just gone through. Don't make any large financial decisions right away and instead give yourself six months to a year to figure out what would be best for yourself.”

With so many important tax, insurance, estate and financial issues on the table, women should consider turning to professionals they trust — an attorney, a financial professional, a tax professional, etc. — for guidance and advice, says Kenealy. “A CERTIFED FINANCIAL PLANNER™ professional can help you get your arms around your entire financial picture, can help you set goals and prioritize, and can introduce you to other professionals so you can have a trusted team of advisers in place.”

CERTIFIED FINANCIAL PLANNER™ professionals can help you do is decide which issues need immediate attention and which can be tabled for later.

March 2019 — This column is provided by the Financial Planning Association® (FPA®) and FPA of San Diego, the principal membership organization for Certified Financial PlannerTM professionals. FPA seeks to elevate a profession that transforms lives through the power of financial planning. Through a collaborative effort to provide more than 23,000 members with tools and resources for professional education, business support, advocacy and community, FPA is the indispensable resource in the advancement of today’s CFP® professional. Please credit FPA of San Diego if you use this column in whole or in part. 

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