Financial Challenges—and Investment Tips—for Women

If you’re a woman, you may well find that, over the course of your life, your financial situation may differ, in some significant ways, from that of a man. So it’s important to know the challenges you might face — and how you might choose to deal with them.

Let’s begin by looking at some of those challenges:

• Women live longer — A woman reaching age 65 can expect to live 19.8 more years, while a 65-year-old man can anticipate 16.8 years, according to the U.S. Department of Health and Human Services. This longer projected life span means more years of living expenses.

• Women get paid less — The “wage gap” between men and women has narrowed — but it hasn’t disappeared. Women who work full time still earn, on average, only about 77 cents for every dollar earned by men, contributing to a $431,000 lifetime wage gap, according to the Bureau of Labor Statistics.

• Women spend less time in the workforce — Women drop out of the work force for an average of 12 years to care for young children or aging parents, according to the Social Security Administration.   And less time in the workforce means fewer retirement savings in 401(k) plans, IRAs and defined benefit plans, such as traditional pensions.

Given these statistics, you can see the importance of taking charge of your financial life. So, whether you’re single, married, widowed, or divorced, consider these moves:

• Contribute to your employer-sponsored retirement plan. Contribute as much as you can possibly afford to your 401(k) or other retirement plan (such as a 403(b) if you work for an educational institution or non-profit agency, or a 457(b) if you work for a state or local government) and increase your contributions every time your salary goes up. Your retirement plan provides you with tax-deferred earnings and a variety of investment options.

• Consider purchasing life or long term care insurance. With so many people approaching their golden years, the costs of long-term care are expected to skyrocket, and with many women acting as caretakers, the financial burden can fall on their shoulders.  It is important to shop around, because premiums and benefits vary enormously. The financial strength of the insurer matters as well. You want the company to still be there, perhaps decades in the future, if you should need the coverage.

• “Max out” on your IRA. Even if you have a 401(k) or other employer-sponsored retirement plan, you may be eligible to contribute to a traditional or Roth IRA. (However, your ability to fund a Roth IRA depends on your income.) In 2012, you can put in up to $5,000 to your IRA, or $6,000 if you’re 50 or older.

• Invest for growth. Studies have shown that, in some ways, women are better investors than men.  Women tend to do less buying and selling, which cuts down on fees and expenses, and women also are more likely to look at the “big picture,” which translates into better long-term investment decisions. However, women also seem to invest more conservatively than men, and conservative investments typically do not produce the growth achieved by more aggressive vehicles. Of course, you need to stay within your individual risk tolerance when you invest, but be aware that investing too cautiously could slow your progress toward your ultimate goals.

By following these suggestions, you can greatly help your pursuit of financial security. So invest early, often and wisely — you’ll be glad you did.

This article is provided by Eric St. Martin, a Senior Financial Associate at RBC Wealth Management in Stillwater, MN, and was prepared by or in cooperation with RBC Wealth Management.  The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice.  For additional information, please visit www.neumanwmgroup.com

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