– yet some continue to encounter struggles

Women are controlling more of their individual wealth these days. However, there are still a few situations that many women do not think about, often derailing their financial future. I myself at one point decided to take the path of being a stay-at-home mom. I felt not only lucky but proud to raise my children as they grew up, having the opportunity to create the best possible home for them. The dilemma however, is that often times we perceive our wealth and money in the present with no clear strategy or expectations about its future. We can get lost in the “happily ever after” story, assuming all will work out for the best without understanding the consequences of not properly planning.

In my case, as well as for many women out there who decide to take similar paths, I faced hidden financial hurdles resulting from divorce. Alternatively, there are circumstances aside from divorce that have the potential to cause financial curve balls; especially apparent in the following circumstances:

1. Divorce. A split from your partner usually means an equal split of the present assets and or liabilities but there can be a big difference between what is “equal” and “equitable.” A woman may divorce only to find she has less earning potential than her former spouse and often times experiencing the consequence with her standard of living suffering due to an income reduction. This is what I experienced personally as a result of my divorce. This is also a familiar scenario for women who have supported their spouses while they build a business or professional practice, or for women who put their career on hold or passed on promotions to accommodate family life and/or their spouses career goals. While these sacrifices may yield a promising future together, unfortunately in the event of a divorce, this sacrifice could have significant consequences on future finances. It is important that women take these considerations into account in order to financially cope with the unexpected challenges of life. Furthermore, it is important for women to be prepared to manage their savings as well as debt at every phase of life. In the case of divorce, devising a plan will allow the opportunity for an individual to equal out the playing field during this unfortunate event.

2. Absence from the workplace. You may find yourself part of the “Sandwich Generation,” a term often used to describe individuals who are faced with not only child-rearing but caring for aging loved-ones or parents. In many cases, this situation requires an individual to take a break from working in order to manage these responsibilities, however this can drastically impact a person’s retirement. When you are not collecting a paycheck, you are not paying into social security. With less being paid into the system or skipping several years of contributing all together, the less is being paid out during retirement. In addition, an extended absence from the office most likely will have a longer effect on your contribution rate to your workplace retirement plan.

The research shows many people end up relying on social security benefits for the bulk of their retirement needs. That situation is most common among elderly single women. Just because you are not working or work in a part time position that does not provide you with a workplace retirement plan does not mean you should ignore your retirement and savings planning. If your spouse is the only one earning income, the IRS allows for a spousal IRA which allows you to put up to $5,500 (as of 2018) a year away in your name and still get a tax deduction even though you did not earn any income yourself. You can also open up an individual investment or savings account in your name alone and budget an amount every month. Even if there is no tax advantage, you should plan for the future.

3. Investing. Protecting retirement savings is wise but being risk averse does have its downside. By and large, women invest more conservatively than men¹. Some women may adopt such an extremely conservative investment approach, in which their portfolios earn so little, that their retirement incomes can’t keep up with even moderate inflation. Without a growth investment strategy, the risk of outliving your money may increase.

4. Living Longer. No woman wants to wake up one day at 70, 80 or 90 years of age and find that there isn’t enough money to meet their health care costs or basic living expenses. The fact is that… “Without Social Security, more than 40% of Americans aged 65 and older would live in poverty”.²

Elderly women are more vulnerable to falling into this statistic due to the reasons stated above. Imagine having to choose between paying for prescription drugs or food or weighing whether to pay the mortgage or get the car fixed. Anyone who ends up in such straits probably wishes they had planned differently. With the future of government help through social security and state funded medical programs not being properly funded, it has never been more important than today to sit down and develop a plan to reach the goals of not running out of money in retirement.

Citation.

1 – Bajtelsmit and VanDerhei, 1996; Hinz, McCarthy, and Turner, 1996

2 -https://www.cbpp.org/research/social-security/social-security-keeps-22-million-americans-out-of-poverty-a-state-by-state