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Women financial planning

While preparing to host a webcast on women and money for a client company recently, I was asked why I thought we needed to have a separate webcast just for women – doesn’t money work the same way for everyone?

The fact is that yes, money is money. But the way we relate to money, combined with differing life expectancies and career factors, means that we need to approach the “why” behind exercising healthy financial behaviors a little differently.

While everyone has questions about money, here are 3 common questions that I hear from women clients, and how I typically advise them to approach those concerns. What better day to think about this than on International Women’s Day?

Question #1: How do I ensure financial security in retirement?  

Answer: Save early on. This is, of course, one of the biggest concerns for everyone, regardless of age, gender, etc. However, it’s a more pressing concern for women: because women tend to outlive men, we not only need money for those additional years, but are also more likely to have to pay for end-of-life care. 

The best way to address this is to start saving as early as possible. Here are a few best practices to share with your clients:

  • Make sure you’re getting the full match on your workplace retirement plan.
  • Use the auto-escalator tool in your 401k, if available. If not, increase what you’re putting in by 1% per year, no matter what, until you’re maxed out. You won’t miss the money and soon you’ll be saving more than you thought possible.
  • If your employer doesn’t offer a retirement plan, make sure you’re still saving in a retirement account like an IRA or Roth IRA. If you’re self-employed, a solo 401(k), SEP-IRA or SIMPLE IRA might be best.
  • Run a retirement calculator. Believe it or not, studies show that this could be the single most important thing you can do to create a secure retirement. Just knowing where you stand is powerful!

 

 

Question #2: How do I start investing?  

Answer: With confidence! Many people find investing intimidating, so they avoid it, which minimizes the potential of the money they do save. Don’t miss out by not investing.

At a minimum, make sure that your retirement savings are invested appropriately for your age and risk tolerance. For many, that can simply mean choosing a Target Retirement Date Fund (“TDF”) of the year closest to when you’ll turn 65. Really, it’s not a bad idea to put all your retirement eggs in that basket because a TDF is well-diversified across industries, companies and geographies, in a way that is most appropriate for an investor your age.

Also, check to see if you have a workplace financial wellness benefit through your job. These are becoming increasingly popular, and may offer you access to totally unbiased financial coaches who can help you learn more without pushing an agenda.

Question #3: How can I save for personal goals?   

Answer: Plan ahead. Some life events we plan and anticipate for – like living abroad or starting a family. Others – like caring for aging parents or a sick child may come about unexpectedly. The best way to make sure that you’re financially fit to reach your personal goals is to prepare yourself financially during the years you ARE working to minimize the effect of taking time away. A report from Financial Finesse found that a 35-year old who leaves the job force for 10 years, then comes back to work 20 more years at 45 would need to save 25% of income during all working years in order to enjoy a secure retirement! This drives home the need to create savings habits early on and to stick with them through the years.

When it comes down to it, creating a secure financial future isn’t rocket science, but it does require a little work to make sure you’re covering all the bases.

If you’re a woman CPA, what financial tips do you have for other women? How can we empower women to continue making smart financial decisions? Let us know on Twitter, tag @360finances and use the hashtag #InternationalWomensDay!

Today is also a good day to consider furthering yourself professionally. Consider joining the AICPA’s Advancing Women in the Accounting Profession webcast on March 29 at 10 a.m., or attend the AICPA’s Women’s Global Leadership Summit, Nov. 14-16 in New York. Turn to the AICPA Women in the Profession site at aicpa.org/womenlead for more details.

Kelley Long, CPA/PFS, Unbiased Financial Planner, Financial Finesse. Kelley is a member of the AICPA Consumer Advocacy Board and a resident financial planner with Financial Finesse, the provider of unbiased workplace financial wellness benefits to employers throughout the U.S.

Financial planning courtesy of Shutterstock

Originally published by AICPA.org