Written By: Lori Price, CFP®, Wealth Manager & Partner
Women are increasingly responsible for household finances representing a significant shift from previous generations. These changing trends shouldn’t come as a surprise given that women have a longer life expectancy than their male counterparts and the average age of widowhood is 58. In fact, an estimated 85% of women die single. Despite these cultural shifts, anecdotally, women still generally trail men when it comes to financial literacy.
Here are three important moves for women who are taking control of their finances by choice or by circumstance to help set them on a path for a stronger financial future:
Prioritize an advisor who prioritizes your education
The biggest key to success for women who are recently divorced or widowed is learning the basics of investing, taxes and insurance. These weren’t lessons taught in school or at home but are immeasurable skills to have in order to achieve financial success through life. It’s important to be able to understand the parts of your financial plan, including the differences between a Roth individual retirement account (IRA) and a traditional IRA, the administration fees associated with your company’s 401(k), the potential opportunity cost of leaving a lot of money in cash at the bank, and the line items on your tax forms.
An experienced, patient financial advisor will help you understand all of these aspects of the planning process so you can be engaged in your financial journey and raise questions or concerns. Waiting until you get to retirement’s doorstep before learning about your options is sometimes too late or the reason you might need to continue working longer than you originally intended.
Ask questions geared toward long-term success
While a referral from a close friend or family member is important, your friends, parents, or siblings’ financial advisor may not necessarily be the best fit for you. When considering whether a financial advisor is a good fit, there are a handful of key questions that can help ensure long-term success. For example, ask how many clients the advisor has worked with who are in a position similar to yours. These should be clients with comparable income and assets who are in a similar stage of life. If you are recently divorced, and an advisor has never worked with a divorcee, they may not be equipped to assist you through that life transition and into your next chapter.
Other important questions include: Do your services take taxes into consideration or do you have an automated trading system that makes trades without reporting on taxes? How do you manage risk tolerance? Do you match the risk in my portfolio to my comfort level? What fees do you charge and how are they paid?
While it’s natural to seek advice from family and friends, they may not be the most credible sources when it comes to your finances. Working with a financial advisor can help you avoid common misconceptions and help you identify the best tax and investment strategies before you make a decision that will have repercussions a year or even decades later when it’s too late to fix it. Of note, your relationship with your advisor should be based on trust, so it’s important to have a firm grasp on their expertise and services.
Plan for the “ifs” in life
Given that women statistically have a higher life expectancy than men, it’s important to plan for any of life’s “ifs.” Whether it’s the passing of a spouse, medical bills, or a new roof on your home, budgeting for unexpected expenses can prevent a debt or retirement setback. With age, expenses like dental work or in-home care can be costly. Having savings and proper insurance can help turn a mountainous cost into a nominal one. Plus, planning for long-term care could potentially help remove the financial burden from your children or family in the event you need such services. Your estate documents also need to be up to date including a will or trust, a living will, and power of attorney for health care and financial affairs.
With unparalleled access to information at our fingertips, it is easier than ever to do your research and find the right advisor who can help you build a financial plan. We provide clients with holistic financial planning that touches on their unique considerations and what matters most. Contact our team to learn how our financial advisors can work with you.