Women and Investing: Important Considerations

Important insights for women investors

When developing long-term financial plans and executing them over their lifetimes, women face unique challenges. From gaps in work history to care for infants and elders to earning comparatively less on the dollar than male peers, there are extra factors for women to consider — especially if they don’t have a will or trust in place.

In his work as a financial advisor and leading RBFCU Investments Group, Investment Program Manager Terence Powell, Jr., AIF® sees many women not only invest but also succeed in developing wealth and financial independence. So we reached out to him for insights on this important topic.

Question: How important is it for women to take control of their finances?

Terence: I think it's vitally important for women to take control of finances — it doesn’t happen as much as it probably should. Here’s a classic example: In many older households with traditional gender roles, the husband manages the checkbook and the bills. Financial information isn’t shared with the wife. And maybe that works OK for a long time. The problem often arises when the husband passes away. Suddenly, the wife is left knowing very little about the family’s finances. This situation creates unnecessary angst and confusion.

Yet problems can also crop up in households headed by younger couples where both partners have their own careers, maintain separate checking accounts and split the household expenses. Still, if they don’t communicate well with each other, often the left hand doesn't know what the right hand is doing, financially speaking. When a loss occurs — be it through divorce or death — the wife may find herself in a situation not unlike that in the earlier scenario. Debts, trouble locating accounts — these can all be significant issues a grieving partner faces.

Meanwhile, for single women, it’s good for them to understand their financial health and to develop strategies to grow their savings. Also, if a single woman later decides to get married and pool finances with a partner, after having developed confidence and knowledge around financial matters, she’ll be more likely to play an active role in the household finances.

Question: What unique financial challenges do women face?

Terence: First, women are historically paid less for doing the same work. In professions like teaching and nursing where there are a higher percentage of women, the work is often undervalued and underpaid. Unfortunately, this impacts their long-term earning power and potential.

As we’ve seen over the last several decades, when women are in the workforce, they can be very successful. Yet they often choose to leave work to do something that’s equally, if not more important — raising children, providing support for elderly parents or caring for disabled spouses and siblings. But that kind of labor-intensive caregiving isn’t paid work.

Unfortunately, Social Security ignores this kind of unpaid labor. At retirement age, your Social Security Retirement benefit is based on the hours you work and your highest wages. That’s another way that, when women take time off to tend to family needs, the decision can have a negative effect on their financial health and golden years.

A good financial advisor, however, knows to consider the many ways that women’s careers and earnings paths are different. And they’ll help a client work toward better outcomes.

Question: Are there specific ways RBFCU Investments Group encourages and supports women investors?

Terence: I'm proud that our operations and financial advising teams are culturally diverse and are a mix of women and men. This is important.

And, when it comes to the support we provide individual clients, we place great importance on the financial advisor-investor relationship. Our staff is trained to be active listeners. When I’m working with a couple, for instance, I want to make sure that I hear each person’s goals and ideas and questions during our conversations. If I don’t hear that, I’m sure to ask specific questions directed to each individual.

In terms of investing, we advise everyone, both women and men, to start as early as possible with long-term planning and investing. Sure, when you're just out of college and starting your first job, it's difficult to imagine what life will look like at age 60. But it’s important to do so — the sooner the better, and, yes, especially for young women.

Question: Gen X, Millennial and Gen Z women are poised to inherit sizable assets as wealth is transferred to them from their Baby Boomer parents. How should women prepare for this shift?

Terence: Well, if you're an older woman with children, you should consider involving your children in your finances. These are hard conversations, but they are also very important ones.

If your children or other heirs are not part of your trust documents, aren’t listed on your checking and savings accounts, and don't have a power of attorney to manage your affairs, then you’ll want to at least ensure that they know the names of your accountant, attorney and financial advisor. You might even consider letting your children sit in on a meeting with your financial advisor. And, if you don’t have an estate plan, talk to an attorney right away.

Conversely, if your own parents are older and they haven’t discussed their wealth transfer plans, you probably should find a way to politely begin a conversation on the topic. This is especially important for children whose mothers will outlive their husbands. As we discussed, older women who haven’t been involved fully in financial decisions can find the prospect of handling funds and accounts overwhelming and confusing. Alas, this can prove detrimental to their own long-term care options.

Take the situation of my neighbors. The husband retired from the Navy and then worked for the government. They did a great job saving, and he had a good pension. As a matter of fact, they did everything you're supposed to do. The long-term care that he needed required his entire monthly pension. So, to make ends meet, they started spending a much higher percentage of their retirement assets than expected because of a lack of long-term care insurance.

In that kind of scenario, the financial problem arises for the wife after her husband dies and the pension goes away — or she receives only half of it. Maybe retirement savings are already spent, too. Suddenly, she finds herself compelled to sell their house or other assets to stay afloat or pay for her own care.

This is where an experienced financial advisor, like those at RBFCU Investments Group, can be helpful. We can guide women and their families toward options like long-term care insurance and other strategies that may help older women plan for these worst-case scenarios.

Question: Any final thoughts or advice for women who want to become more engaged with investing and financial planning?

Terence: Take action! You deserve a seat at the financial planning table, and we at RBFCU Investments Group have a seat for you. We’re committed to making sure that you have the information and guidance you need to make decisions that are in your best interest.

Starting now with one of our financial advisors is my best advice for women who want to financially move forward with their goal-based plan. Experience firsthand the benefits of working with our team. Contact us today at 1-888-294-0202 or visit rbfcu.org/investments to schedule a no-cost, no-obligation initial appointment.

Last updated September 2023.

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