Financial planning and money management are essential for everyone, regardless of gender. However, the financial needs and priorities of women often differ from those of men due to a combination of factors. Recognizing these differences is important to be able to provide personalized financial advice and better equip women to navigate their financial futures.
Longer Life Expectancy and Retirement Planning
One of the most significant differences between men’s and women’s financial needs is related to life expectancy. In the US, women are expected to outlive men by 5.3 years,1 which has a direct impact on their retirement planning. This extended lifespan means that women need to save more for retirement to make sure they have enough income to cover expenses in later years. Women might need to adopt strategic investment strategies that balance growth and risk, to ensure their savings last throughout their extended retirement and they do not outlive their money.
Pay Gaps and Career Interruptions
Lower lifetime earnings due to the gender pay gap continues to be a concern. Additionally, women are more likely to take career breaks or work part-time to accommodate caregiving responsibilities, further affecting their lifetime earning potential. These income disparities create a gap in wealth accumulation and investing for their future.
Healthcare Costs and Family Planning
Women’s healthcare needs are unique and often more expensive. Women utilize health insurance 10% more than men2, due to factors such as more annual exams, reproductive health, pregnancy, and the additional healthcare needs from just living longer. To widen the gap, insurance companies pass along more out-of-pocket medical expenses like copays and deductibles for female services. A long-term financial plan should review Health Savings account options, Long-Term Care Insurance and budgeting for unexpected health costs.
Risk Aversion and Financial Confidence
Research shows that women tend to be more risk-averse than men when it comes to investing. This can result in missed opportunities and limit their wealth accumulation. By fostering a greater understanding of their own risk tolerance and the potential rewards associated with different investment approaches, women can develop a more balanced portfolio that not only allows for meaningful growth over time, but also increases confidence in navigating the investment landscape and achieving financial independence.
Social Security and Pension Gaps
Women are more likely to rely on social security or pension benefits during retirement due to their longer life expectancy and typically lower lifetime earnings. However, these benefits are often not sufficient to cover all of their living expenses, leading to financial insecurity in later years. Women should have a strategy for supplementing these benefits, whether through additional savings, investments, or other income sources.
Conclusion: Tailoring Financial Planning to Women’s Needs
Financial planning should be personalized to address the different needs of women and have a long-term approach to prepare for a potentially longer retirement. Even if you are planning as a couple, it is crucial that these gaps are included in the conversation to ensure that the plan supports women individually.
As Wealth Advisors, we have an essential role in helping women to overcome these gaps, empowering them to make informed decisions, and developing a plan that accounts for their different needs. At Biondo Investment Advisors, we want to help work toward a more equitable financial future for all, so that women are prepared to meet their financial goals and live comfortably throughout their lives.
1 https://usafacts.org/articles/do-women-live-longer-than-men-in-the-us/
2https://fortune.com/well/2023/09/26/how-employers-can-fix-covert-health-insurance-pink-tax/
