In our continuously evolving world, men and women are becoming equal partners, more so than ever before—both in caring for their families and in the workplace. And yet, even today, women still face specific financial challenges that cannot be overlooked. Every women is all too aware of the issues: a long-standing gender pay gap, loss of income due to care taking, higher retirement and longevity expenses, and more. As an advisor, one of the greatest services you can provide is to help women overcome these challenges by planning in a way that addresses their unique issues head on.
It’s no mystery that women’s roles have changed dramatically in the past 50 years, and yet the actual numbers may surprise you. In the 1950s, not only were men the primary breadwinners, but only 33% of women were in the workforce at all 1 , and only about 7% of women held a college degree 2 . Women were almost solely responsible for homecare and childcare. That’s a stark contrast to today. Now women earn more bachelor’s degrees than men, and 40% of women are their families’ primary breadwinners. 3 As a result, the number of wealthy women is growing at twice the rate of men.
For advisors, this fact alone should make serving women a top priority for your business. A quick look at the numbers makes this need particularly clear:
Of course, adding real value for this underserved group requires much more than simply updating your marketing materials to include women. The unfortunate truth is that, despite significant advancements in their careers and their wealth, women are still investing less than men. Even when they do invest, they tend to invest too conservatively to meet their needs. The result: women’s retirement account balances are 1/3 lower than their male counterparts 4 . To make matters worse, due to lower pay and time away from the workforce, women receive 23% lower Social Security benefits than men. 5 Considering that women live an average of 8 years longer than men, this reality puts them at a very real disadvantage as they face not only retirement, but also the need for a basic level of financial security.
The good news is that you can help. By helping women tackle these 5 key areas of financial planning, you can not only help them improve their own financial outlooks, but also help build your practice in a meaningful way:
1. Develop a savings strategy that accounts for multiple layers of responsibility.
While men tend to focus on building family wealth, women tend to focus on building wealth for their families, often sacrificing their own needs to support their children, aging parents, and others in need. They’re also more inclined to serve as the family caretaker, resulting in fewer hours in the workplace.
Encourage your client to start saving as early as possible to bolster her savings by leveraging the power of compounding. Not only will saving more now help protect her own financial future, but it will also increase her resources to help care for her family—both during her lifetime and beyond.
2. Consolidate retirement accounts.
Time away from the workforce also means women are more likely to have multiple retirement accounts with past and present employers. Be sure to identify all of your client’s retirement accounts and discuss the value of a consolidated investing approach that helps ensure proper diversification and asset allocation. By consolidating her accounts, you’ll be better able to design and implement a strategy to address her unique needs.
3. Align investment strategies to her time horizon.
In general, women tend to take less risk with their investments. This conservative investing approach can reduce portfolio performance opportunities over time. Introduce the relationship between risk and return, and then discuss how her goals, personal risk tolerance, and time horizon inform a suitable investment strategy. Then, work with her to create a strategy that includes a strong growth component to help meet her long-term needs.
4. Maximize catch-up contributions.
Two of the biggest financial challenges for women are the gender pay gap (women still earn an average of 20% less than their male counterparts 6 and lost income due to time away from work to care for children and other family members. These realities have forced many women to underfund their retirement accounts—sometimes to a dramatic degree. By maximizing your client’s catch-up contributions, you can help her close the savings gap to create a more secure retirement.
5. Create a reliable retirement income stream.
Throughout the planning process, keep your client’s need for a reliable income stream top of mind. Why is this more critical for women than for men? The average age for widowhood is just 59 7 , which means your client may not only take charge of her family’s wealth sooner than she expects, but she’ll also need income to support her for the rest of her life. Knowing that the average life expectancy of a 65-year-old woman today is 86 8 (nearly a decade more than a man of the same age), she needs to be saving and investing at a fast and furious pace to create a reliable income stream for her lifetime.
2Percentage of the U.S. population with a college degree 1940-2016, Statista, 2018.
3The National Center for Education Statistics, 2015-2016. Updated as of March 2018; Why Has Women’s Economic Power Surged? Five Stats You Need to Know, Forbes, Jan. 2017.
4Why Aren’t Women Saving Enough for Retirement?, Yale Insights, May 2017.
5The Wisest Retirement Solutions for Women, Forbes, September 2017.EndFragment
6The gender pay gap in the US is still 20 percent—but millennial women are closing in on men, cnbc.com, Money, August 2017.EndFragment
7Suddenly single: The realities of going from two to one, CNBC, Aug. 17, 2016.
8Life Expectancy at 65, OECD Data, OECD.org, 2015.
The information and opinions contained herein are for general information use only. IndexIQ does not guarantee their accuracy or completeness, nor does IndexIQ assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are as of the date of this report and are subject to change without notice. Past performance is no guarantee of future results. New York Life Investments does not provide legal, accounting, or tax advice. You should obtain advice specific to your circumstances from your own legal, accounting, and tax advisors.
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