Women Face Unique Financial Challenges. If you were to
guess which issue women worry about most, would you guess
family, health, time, stress, or maybe equal rights?
According to a March 2000 gallop poll, the answer is their
finances. This response may surprise you now, but consider
the following list of financial issues unique to women.
Consider these results from a women-and-money incubator,
and research by Bruce W. Most and William L. Anthes:
- "Women are more intimidated than men about financial
issues
- Women earn less money than men
- Women are less prepared for retirement
- Women receive smaller retirement benefits
- Women live longer than men
- Women are poorer in retirement than men
- Women are more conservative investors than men"
We would also add
- Special difficulties for single mothers
- Women caring for elderly parents
- High-deductible health insurance plans cost women more
- Women may defer to men regarding financial decisions
- More women manage daily family finances
- Retirement issues because of divorce agreements
- Male-dominated financial services industry
Earnings Differences
It is a well-documented fact that women earn less than men
do. A study by the American Association of University Women
Educational Foundation as reported by Ellen Simon
{AP}:"Women make only 80 percent of the salaries their male
peers do one year after college...10 years after college,
women earn only 69 percent of what men earn...Even after
controlling for hours, occupation, parenthood, and other
factors known to affect earnings," the study found that
one-quarter of the pay gap remains unexplained.
Most and Anthes report that "According to the U.S.
Department of Labor, women working full-time, year-round,
earn roughly 74 percent of what men earn... (and) workers
in the age category of 45-54-the prime earning years for
most people-women earned $516 a week while men earned
$732." It gets even worse for single mothers with young
children whose "median income in 1998...was $14,248. This
figure is the lowest among all family types, representing
roughly one-fourth the median income of married-couples
with children...and approximately three-fifths that of
females with no children."
Retirement Differences
Women are often less prepared for retirement than men. Most
and Anthes also noted that a study that found 58 percent of
baby boomer women had saved less than $10,000 in a pension
or 401(k) plan, while baby boomer men had saved three times
that. In addition, the fact that women live longer than men
means that they need more money in their retirement than
men do.
Investment Differences
Also, a 1997 study by Dryfus and the National Center for
Women and Retirement Research showed that women investors
were more worried than men about running out of money in
old age, preferred more conservative investments, wanted
fixed/steady returns, were more unnerved by stock
fluctuations and worried more about investment decisions.
Social Security Retirement Differences
Of course, less money earned by women, means less money
saved for retirement or contributed to Social Security
benefits, and because women live 79 years on average while
men live 72, women retirees are poorer in retirement than
men. Most and Anthes note that according to the
Administration on Aging "...half the elderly widows now
living in poverty were not living in poverty before their
husbands died. The picture is even worse for older women in
many minority groups".
Decision Making
The next generation of retirees may have been raised in an
environment in which men handled the money decisions. More
women actually pay the weekly bills, but they may have
little knowledge of the larger family finances such as
retirement plans, Social Security, IRAs, insurance,
annuities, etc. because they may have deferred to their
spouse's decisions.
It is essential for women to understand the 'big picture'
of their finances, especially for retirement, divorce, or
death of their spouse. Because women make less than men,
are less prepared for retirement, and receive smaller
retirement benefits, they need to make sure that their
husband's retirement benefits will pass to them if their
husband dies first. Because women may be more intimidated
about asking questions of their attorney or financial
advisor, they may miss crucial details (such as single-life
annuity which may bring higher levels during the husband's
life but that ends when the husband dies first), or
incorrect beneficiaries on life insurance policies.
Divorce
During a divorce, women may be more concerned about custody
issues and keeping the house than their future retirement
and may agree to forgo the 401(k). Single parenting brings
a whole host of financial challenges, including lost wages
from parenting responsibilities and childcare and
babysitters. If the extra expenses and possibly lower
income are not included in the divorce settlement, the
single mother may find that she is unable to keep the house
and she loses the two most valuable assets: the house and
the 401(k).
Health Insurance
Women not only make less money than men, their health plan
may cost more reports Mike Stobbe {AP}. When an employer
changes to a high-deductible plan, it costs on average
$1000/year more for women than for men due to mammograms,
the cervical-cancer vaccine, Pap tests and pregnancy
related services. This is unfair, but while the inequity
exists, women must make an extra effort to contribute the
difference to a Health Savings Account or savings program
to avoid using credit to pay for the added medical bills.
We have personally experienced the $4,000 deductible per
year health insurance plan and, although it is better than
no insurance, it can certainly make a dent in the family
budget.
Care Giving
Another huge drain on women's finances is caring for their
aging parents. More women care for aging parents than men.
However distasteful it may be to condense a daughter's love
for her parents into a discussion of money, this issue must
be addressed so that women can prepare. Because of the
aging baby-boomer population, these numbers will soon
become staggering. If you add caring for young children
into the mix at the same time, the financial results can be
devastating.
What Should Women Do?
Because of the special issues facing women, it is crucial
that women educate themselves about finances and the
realities of financial gender inequity and plan for their
future. The male-dominated financial services industry is
just beginning to realize the unique financial planning
issues for women. Make sure that your trusted advisors
understand these issues and are helping you plan
accordingly. Don't be afraid to ask your advisors questions.
Summary Now is the time to begin planning for the future:
- Have a plan
- Increase your knowledge and understanding of financial
matters
- Utilize trusted professional advisors to implement your
plans
- Regularly monitor your progress.
----------------------------------------------------
Kent E. Irwin, ChFC, CLU, CAP, co-founder and CEO of
eFinplan.com. eFinPLAN is the first and only web-based
comprehensive consumer financial planning software designed
for people who are trying to do a lot of their own
financial planning. Find out more about how do-your-self
financial planning and how to reach your goals at: =>
http://www.efinplan.com/
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