Financial Focus: Women and Investing: Your Special Financial Considerations
Women and Investing: Your Special Financial Considerations
It's unfortunate, but still true, that if you're a woman, you face a variety of challenges in the workplace. And these issues translate into potentially serious problems for you as you save for retirement. To avoid these difficulties, you need to take action--now.
Let's consider some of the facts that underlie and illuminate the formidable tasks that women face:
* Lower earnings- Over the past few decades, women have made great strides in the quest to achieve earnings equality--but they're not there yet. Women currently earn, on average, about 80 percent as much as men, according to the Bureau of Labor Statistics.
* Less time on the job- Women are more likely than men to take time away from their careers to rear children or care for aging parents. Consequently, women typically work 32 years, compared with men's 44, according to a study by the Center for Retirement Research at Boston College.
* Lower income in retirement- The total median annual income for women 65 and older is 43% less than the median income for men of similar ages, according to the Older Women's League, a research and advocacy group.
* Longer life spans- Women live an average of seven years longer than men, so they are more likely to outlive their financial assets.
So, there you have it: Lower earnings, extended time away from work, lower retirement income and longer life spans. Together, these factors point to a huge need for women--whether married or single--to do some serious financial planning. Fortunately, there are many steps you can take. Here are just a few:
Pay Yourself First:
Every time you get paid, turn around and write out a check to whatever savings or investment vehicle you have chosen--before you pay any other bills. Better yet, take advantage of payroll deduction, bank authorization or systematic investment plans so that your money is automatically invested before you even receive it. Such a plan, however, does not assure a profit and does not protect against loss in declining markets.
Invest For Growth:
Many studies have shown that women tend to invest more conservatively than men. Yet, to achieve your retirement goals, you may need to put some of your investment dollars into "growth" vehicles, such as stocks or mutual funds. Historically, stocks have appreciated more than other types of investments. More importantly, other types of investments, such as CDs or Treasury bills, may not even keep up with inflation, so you could end up losing purchasing power if your portfolio is not well diversified.
Take Full Advantage of Available Retirement Plans:
Save on a pre-tax basis through your employer's 401(k) or by making IRA contributions. If you can't deduct an IRA contribution, consider a Roth IRA. Contributions to a Roth IRA are not deductible, but a Roth does offer tax- free income at retirement under certain circumstances. If you are self- employed, consider opening a Simplified Employee Pension Plan (SEP) or other qualified retirement plan that may offer you a business tax deduction.
You're In Control:
By following the steps described above, along with any others that make sense for your individual situation, you can take charge of your own financial future. It will take some time and effort--but the ultimate goal is well worth it.
This article was submitted by local financial representatives of Edward Jones.