In a marriage, you have spent most of your adult life dedicating your time to your family – your spouse. When that is pulled out from under you it can be hard to navigate your own emotions, let alone the practical administration of what you should be doing for your financial security.
There comes a time in our lives when things have maintained a status quo of sorts for so long that it can be hard to picture a life without what you once had. You have a new life that doesn’t look at all like what you thought it would and sometimes it can be hard to recognize – your life and yourself in it.
According to AARP, almost two-thirds of women in middle and older age have experienced some type of major financial transition.[1] While the transitions can vary from marriage to divorce to retirement or even losing a job later in life, the outcome can often be the same—you end up in a place where you may not know what to do about your finances or how to take the first steps.
Men also face these challenges, but women have higher life expectancies, lower retirement savings, and a higher likelihood of facing financial challenges on their own. According to a study put out by Wi$eUp, a financial education program for Gen X and Gen Y women, 99 percent of women will be financially responsible for themselves or their families at some point in their lives.[2]
Divorce and Widowhood is Harder on Women than Men
Income for a woman after a divorce can fall as much as 41% compared with 23% for men. Widows face similar challenges though the income gap narrows a little bit to 15% instead of 18%.[3] Why is there such a disparity?
The three main sources of retirement income (Social Security, pensions, and earnings) are designed to work more to a man’s benefit than a woman’s. Men have higher and more consistent earnings during their working years, all of which amounts to greater retirement benefits and income when they choose to end their career.
To and through retirement, women are charged with earning less money and then making it last longer. While we would all like to make the world a fairer place with more equal pay for men and women, in the meantime we need to identify solutions to the problem that is in front of us right now.
Save More Money and Start Earlier
Of course, this is easier said than done. Sacrificing our time and money for our family is almost an inherent part of most women’s existence and trying to stamp out thousands of years of habit is not likely (nor is it necessary). But making some strong efforts to split the difference on your financial sacrifices may help you not to struggle in your old age.
Contributing as much as you can as early as you can to your company retirement plan and staying within a manageable budget will help you grow your nest egg and give it a long enough time horizon to watch it mature. If you want to help your children with their college, then you might consider saving ⅓ or ½ before college and then, during those years, decreasing your retirement contributions a little or supplementing with student loans.
If you put all your savings into college tuition while your children are young, you are losing a decade or so of powerful retirement saving that can mature for much longer than the tuition has time to. Be smart about how you are investing and saving your money. It can be helpful to speak with an advisor who can help you develop a savings and investing plan that works for your unique circumstances.
Try Not to Let Your Emotions Get the Better of You
For women in transition, one of the most emotionally challenging things to consider is whether or not to keep the family home. While a home is typically one of the largest assets that you may have, it is not money that you can live on because you are literally living in it. Of course, that pragmatic thinking doesn’t account for the decades of memories, mementos, and traditions that were built in that sacred place. When I am working with a client who may need to come to terms with parting with their home, I like to help them through a list of pros and cons and help them come to the determination by themselves. Don’t let people coax you into a decision you aren’t ready to make but rather look at the practical as well as the sentimental value of your home and make the choice based on a healthy combination of logic and love.
Financial Planning for Women in Transition
It can often be beneficial to speak and work with someone who is removed from your situation enough to provide an objective perspective. It will be important to find a person who has empathy, compassion and an understanding of your experience and doesn’t approach the relationship as transactional.
Having a financial plan after a transition can help clean your slate and create a strong foundation for your new life and whatever it may bring. It may help you to find some clarity and have some peace of mind in knowing that there are some guidelines and strategies in place to help you move forward.
Whatever stage of life or transition you are in, we are here to help you through it. Please don’t hesitate to contact us with questions or to make an appointment.
[1] https://blog.aarp.org/where-we-stand/womens-retirement-at-risk
