Conversations that Women Should Have with Their Financial Advisers
Here are a few key topics all women should consider when reviewing their financial picture.
Many women who are extremely successful at work still find they lack some confidence when it comes to discussing and planning what to do with their wealth. If you're unsure of where to turn, a trusted financial adviser can be a valuable resource to help you make empowered decisions about your money.
Having worked with many women, I've observed a few recurring themes that women should take into consideration when making long-term financial plans. Here are a few different topics that all women should consider discussing with your own adviser.
Making savings last
Statistically, women live longer lives. According to Statista, the average life expectancy for women born in the U.S. in 2020 is 81 years, as compared to just 76 years for males. This means all women in the U.S. should save for a relatively longer retirement.
Consider an example of two people who retire at the age of 65. Both want to spend $70,000 each year starting the first day of retirement. They estimate they will earn a 6% return on their retirement savings and they want to each give themselves a 3% annual cost of living adjustment. If a man lives until age 76, he'll need to have saved roughly $670,000 by the time he retires. If a woman lives until age 81, she will need to save an additional $240,000 to cover those additional years.
Of course, this life expectancy figure is still only an average, meaning that there’s a chance you will live longer than this. Studies have shown that individuals who have obtained higher levels of education and wealth have longer life expectancies, so make sure to factor longevity into your long-term financial plan.
Planning for changes in spending
While it might be easiest to think about how much you want to spend in retirement as one lump sum amount each year, how you spend your money tends to change over time as you get older. A flexible retirement plan should look at the various categories of spending and adjust them over time. For example, once your mortgage is paid off, housing costs typically don’t change much unless you downsize. On the other hand, many retirees spend more on travel and entertainment in the early years of retirement and less as they get older, while increasing the amount of gifting they do to family and charity.
In addition to accounting for your general living expenses, it’s also important to discuss potential health care costs with your adviser. An experienced adviser can help you estimate the cost of health care and plan for how to cover expenses that may arise.
You should discuss the transition to Medicare with your adviser, preferably before you are eligible at age 65. Many people falsely assume Medicare is free and will cover everything, but there are premiums to pay, out-of-pocket expenses, and health care costs that simply aren't covered by Medicare, such as dental, vision and long-term care.
As retirement milestones and health considerations will have an impact on your overall spending plan, it’s important to keep an open line of communication with your trusted financial adviser and your loved ones. If you and your partner have a joint wealth plan – or if your financial lives are intermingled – be sure that both parties fully understand each other’s financial goals and are capable of accessing important documents or accounts should the need arise.
The caretaking of you and yours
In the U.S., around two-thirds of all caregivers are women, which has a major impact on their finances. Women are often charged with primary caregiving responsibilities for children, spouses and/or aging parents. They are also more likely than men to adjust their careers or take a break from the professional workplace to care for family — which affects lifetime wages, savings and Social Security benefits.
If you anticipate being a family caregiver to an aging loved one someday, it’s better to start thinking about what that might mean for you sooner rather than later. If your parent has a health emergency, do you know how they want to be cared for? Do you know where to find copies of their insurance cards, health care proxies and durable powers of attorney? No one likes to think about their own mortality let alone their parents’, but taking time to have a conversation with them to plan in advance can save everyone a lot of anxiety should a crisis happen.
Unfortunately, women are often caregivers themselves but frequently overlook planning for their own care later in life. Having a basic set of legal documents in place (such as a will, durable power of attorney, health care proxy and living will) is a good first step, but it’s even better to think through the logistics of needing help in the future. A trusted financial adviser can help you establish a plan, organize your financial affairs and communicate your wishes to your loved ones to help lessen the stress on you and your loved ones in your golden years.
Maximizing tax benefits
Charitable donation deductions have long been favored as a way to lower taxable income, but much has changed with the 2017 Tax Cuts and Job Act (TCJA). The TCJA increased the standard deduction and raised the bar for itemized deductions.
A financial adviser can help you navigate strategies so you can continue donating to your favorite charities while also lowering your taxable income. One popular solution to consider is “bunching” several tax-deductible charitable donations that would normally be made over several years and consolidating them into one tax year. Additionally, a donor-advised fund can allow you to itemize a large lump sum donation in one year but gives you the flexibility to make distributions to charities over time.
Focus on the big picture
Financial planning isn’t just managing stocks and bonds for retirement. It’s a blend of investment strategy, tax and estate planning, personal goals, risk tolerance and so much more. Any financial adviser worth their salt should be able to help you think holistically about your financial picture and ensure each piece is planned for — from establishing an estate plan to making sure you have the appropriate level of insurance coverage.
Like working with a personal trainer or professional coach, partnering with a trusted, knowledgeable adviser can help keep you on track to reach your financial goals. The process takes work, but the end results and peace of mind that a thoughtful financial plan provides make it worthwhile.
About the Author
Senior Wealth Adviser, Boston Private, an SVB company
Kathleen Kenealy, CFP®, CPWA® is the Director of Financial Planning and a senior wealth adviser for Boston Private, an SVB company. She specializes in working with successful individuals and families to manage, protect and grow their assets. Kenealy provides guidance on investment, retirement, philanthropic, estate and tax-planning strategies.