By Angie O’Leary, senior vice president with U.S. Bank Wealth Management
Women have a lot to be proud of today. We are healthier, wealthier and wiser – yes, even compared to our male counterparts we have made great and well-deserved strides. A few statistics bear this out:
- Women comprise nearly two-thirds of the U.S. workforce. And we are narrowing the wage gap, especially women with advanced degrees, who are making more than their male counterparts. (Statistics from the U.S. Census Bureau: BCG Study, 2010; Allianz study, 2008.)
- Women control 27 percent of the world’s wealth and approximately 51 percent of private wealth in America. (CEB: Inside the Mind of the HNW Woman -Six Insights to Better Serve Female Clients (2012).
- And women are living longer and are expected to inherit $1 trillion of intergenerational wealth transfers. (Hinchcliff, D. (2014) Wirehouses, Women and Millennials Are Misinterpreted, Krawcheck Says. FA Magazine Online.)
With all this promising news, we’d expect women to feel good about their financial future, and be fully prepared for retirement, right? Think again. Studies show that barely 33 percent of all women surveyed feel they are on track or ahead of schedule in planning or saving for retirement, down from 46 percent in 2008. Even more shocking, affluent women (those making north of $200,000 in household income) are worried about becoming the proverbial “bag lady” in retirement. So why are women earning and controlling more, yet feeling less secure and confident?
The reason has to do with the headwinds women face:
- Women still earn less … in fact $0.78 cents on the dollar compared to men. We have made great strides in this area, and some statistics show that younger, millennial-age generations have caught up to this income disparity. But for those closer to retirement, this reality is all too real. (Statistics from the U.S. Census Bureau.)
- On average women can expect to live 5 years longer than their male counterparts. In turn, women have a longer retirement runway compared to men and therefore are funding longer retirements and are disproportionately affected by healthcare costs. (American Association of Long Term Care Insurance, 2014.)
- Women often are forced to decide between career and caregiver, and many choose to try and do both. Choosing to take a leave from work can mean a decrease in household income, a gap in contributions to employer sponsored plans like 401(k)’s and Social Security, and sometimes, consequences to pay and career advancement.
In light of these realities, women need to be smart about preparing for their financial future. The good news is that women are good planners. When armed with the right information, there are four important steps that can make a big impact on a woman’s path towards financial security and confidence.
Establish a Financial Roadmap
First, get your arms around your key financial goals. Want to buy a house? Want to retire early? Document those goals. Then, get a grasp on your current financial reality. Your budget (income versus expenses) is at the core of this. Where is your money going? Do you have assets and savings already earmarked towards your goals? Based on your goals, and the actions you are taking today, will it get you to where you need to be?
Set Aside an Emergency Fund
Do you have an emergency fund set aside to address short term unexpected things like healthcare, vehicle, or even a job change? A cash or savings account with three to six months’ worth of income is the typical recommendation.
Understand Your Financial Risk Factors
What are the potential risks to your plan? Longevity in retirement, inflation, market and potential healthcare costs can significantly impact your plan. Therefore, women need to take a disciplined approach to saving more and managing risks. Make sure to take full advantage of employer sponsored plans (with company match) – increase your savings rate every time you get a raise. In addition, make sure to leverage tax advantaged health insurance savings accounts.
Invest in Your Future
Continue to invest in your career. Go for that advanced degree or certificate. Ask for that raise. Yes, this too can be a part of your plan towards greater financial freedom.
Angie O’Leary heads up the Investment Solutions group for U.S. Bank’s Wealth Management division providing investment products and platform solutions for the personal trust and broker dealer/RIA (USBI). Angie is responsible for product management; desktop tools, product approval and internet capabilities for the investment side of the business. Angie oversees the many mutual fund and insurance product distribution relationships along with the various desktop and internet platforms. She is passionate about driving results and has been instrumental in the expansion and advancement of the investment platform at U.S. Bank. A specific focus has been developing U.S. Bank’s retirement planning capabilities called RealSteps>Retirement. Angie brings more than 25 years of financial industry experience to the organization with leadership positions at U.S. Bank, UBS and Piper Jaffray. Angie sits on several industry roundtable and advisory groups and is often asked to contribute her expertise.
Angie has her undergraduate in business finance from San Jose State University and graduate work complete towards a master’s in Accounting from Santa Clara University. Angie has passed the CPA exam and is working towards her CFP designation.
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