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.
But we live in a world where gender-based discrepancies in earning power, caregiving roles and other important areas are all too real. 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.
The most effective way for women to deal with the realities of these financial gender dynamics is by preparing in advance, paying attention to life transitions, when these dynamics can have a more pronounced impact.
Here’s a look at three transitions that, for women, may require extra attention and planning:
1. Caring for a loved one. Providing care to an ailing loved one often entails taking time off from work, setting aside career priorities and, even 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 men.
Making consistent contributions to a retirement plan can compensate for the loss of income. Building a cash reserve to draw from can make up for lost income should a woman be drawn into a caregiving situation.
2. 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 that will have to be made promptly during and after a divorce, and others that could — and perhaps should — be put off until later.
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.
It is extremely important to have a redesign of your financial plan, since your new financial situation may have radically changed, and your initial objectives were determined with your ex-spouse.
3. Retirement planning. A woman reaching age 65 today can expect to live, on average, until age 86.7, compared to age 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.
An estimated 58 percent of women will need nursing home care at or after age 65, compared with 44 percent of men, according to AARP. That makes it important to plan for how to pay for potentially expensive long-term care, whether it’s out of 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.
Unfortunately, these differences are just the reality of the world we live in, but one can and should plan for them.
JASON E. SIPERSTEIN, CFA, CFP, is the president-elect of the Financial Planning Association of Rhode Island and president of Eliot Rose Wealth Management. He can be reached at firstname.lastname@example.org.