Financially “Fit”: How Women Can Make Bigger Strides Towards Financial Independence

Annie finance article  TOP 1 - iStock_000058437588_LargeBy Annie Ellicott

Despite the advent of content available to women about managing their finances independently, most women are still well behind the curve in matters of financial management. The 8th annual Prudential research study published in 2014 about Financial Experience and Behaviors Among Women, cites a disturbing long-term trend in women continuing to be financially insecure: “Women we surveyed feel no more prepared to make wise financial decisions today than they did two years ago or even a decade ago. Nor has their understanding of financial and insurance products improved. Not surprisingly, the Confidence Gap—our measure of women’s confidence in their ability to achieve their financial goals—has not improved over that 10-year span, either.”

This is particularly alarming given that Prudential’s findings show that nearly half of women—44%—are now the primary breadwinners in their households but women are still not earning what men earn with the latest September 2014 Census figures showing women earning $0.783 for every dollar men earned in 2013.

Piggy Bank With Question Mark On Black BoardThe lack of women’s financial security becomes more significant as they near retirement age. According to the  14th Annual Transamerica Retirement Survey of Workers (2014), while 55% of women are saving for retirement outside of work in an IRA, mutual fund, or bank account and 75% of women who are offered an employee-funded plan participate in that plan, only 7 percent of women are “very confident” in their ability to fully retire with a comfortable lifestyle. The Prudential study identified that married women who contribute to their household income, but are not the primary breadwinner, are the most confident they will meet their long-term financial goals and the most likely to consider themselves on track or ahead of schedule with planning and saving for retirement (38% versus 32% for married primary breadwinners). Divorced and widowed women (51%) and single women (44%) are most likely to consider themselves behind the curve in planning and saving for retirement.

The high percentage of women working part-time is another hindrance to financial security in retirement with the 45% of women working part-time are less likely to have workplace retirement benefits. Another study, What Women Need to Know About Retirement: A joint project of the Heinz Family Philanthropies and the Women’s Institute for a Secure Retirement points out that two-thirds of all working women earn less than $30,000 a year in jobs without pensions. Because of maternity and family leave, which average 13 years for women, retired women will receive about half the pension benefits retired men will receive. No doubt because of this, many women are deferring retirement and continuing to work in retirement. According to the Transamerica survey, 43% of women expect to work past age 70 or do not plan to retire and more than half (52%) plan to work after they retire.

woman with debts and billsFinally, while 82% of women are confident managing short term finances (budgets, balancing a checkbook), there is ample evidence that women are not taking matters into their own hands with long term financial decisions largely due to lack of comfort with financial jargon/terminology, knowing where to get help, time constraints and overall comfort level discussing financial affairs. A 2015 Fidelity study revealed that among women who are offered retirement guidance through their employer, 65% do not take advantage of it and 80% of women confess they have at least occasionally refrained from discussing their finances with those they are closest to. Only 47% of women say they would be confident discussing money and investing with a financial professional on their own.

So how can Adventure Women get more financially fit?

  • Learn the basics of managing your money. Take an online course (Cooperative Extension, Suze Orman’s or The Women’s Institute for Financial Education) about the differences between investment vehicles (stocks, bonds, mutual funds, annuities etc.), available investment plans and programs (E-Trade, Fidelity, Prudential, TD Ameritrade, Schwab, Merrill Edge, Scottrade etc.) and planning for retirement. Identify your goals based on what you will need over the course of your employment/retirement lifecycle. Assess your tolerance for risk. Make sure you know the costs (broker commissions, account minimums, extra fees) associated with different brokerage accounts for buying and selling securities. Carefully consider the tax implications of your savings/investment strategy.
  • Invest the time. Take advantage of available education, assistance and professional advice offered through local community channels, your employer, your bank and your other avenues used by women in your networks. Ask around…
  • Get help. Decide if you want to use a professional partner or “do it yourself”. Choose your professional carefully based on your specific situation (requirements, 5, 10, 20 year goals, risk tolerance) and how much you want to do vs what they will do for you.
  • Stay current. Change your strategy as things change. As you buy a home, pay off debt, your kids college fund is no longer an issue and your employment trajectory changes, adjust your plan accordingly. Measure your progress at least quarterly.

Go for it, girls!