Financial Challenges for Professional Women

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About the Author Advisor

liz mcqueen

Liz McQueen, CRPC®

Vice President/Partner
Kirkland, Washington

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Professional women face unique financial challenges in America. But perhaps the biggest obstacle to overcome is the mistaken fear that women are not good enough to handle the finances. A 2021 Fidelity report found that women investors outperform men by 40 basis points (0.4%) — translating into tens of thousands of dollars over time. What’s more, 67% of women surveyed saved beyond their retirement accounts (up from 44% in 2018), and 20% have over $100,000 saved. Despite these successes, only one-third of women see themselves as investors.

So, if you’re a professional woman in America, the first step toward overcoming the myriad of financial challenges you face is to first understand that women have a place at the table. They need to sit at the table when it comes to financial decision-making, and they need to take up space.

Now, let’s examine some of the other barriers women face when it comes to investment management and consider what we can do to gain the financial security we I deserve.

 

Earning Challenges

Unfortunately, the wage gap is still a genuine phenomenon:

  • In 2020, women earned 83 cents to every dollar earned by men.
  • In places like Wyoming, Utah, and the District of Columbia, the gender pay gap is above $15,000.
  • The opposite-sex spouse earnings gap doubles two years before the birth of a child and one year after.
  • The “motherhood penalty” means that mothers earn 58 cents for each dollar fathers make.
  • Though the gap starts to narrow a year after birth, the motherhood penalty persists for 10 years.
  • Twice as many women (43%) as men went for at least one year with no earnings due to caregiving responsibilities.

Without paid parental and caregiving leaves or work schedule flexibility, women are forced to cut back. And here’s the real problem: women are the sole or primary breadwinner in 41% of American households with children, according to the Center for American Progress.

 

Investment Challenges

When it comes to investing, fear is one of the biggest challenges. Men may tend to look for “the next hottest stock,” while women are likelier to set it and forget it.

Studies show women trade less often—though it’s not because they statistically take fewer risks than men. Instead, women simply require more information before taking action. And they’re more likely to seek the help of an independent advisor to guide their trading decisions.

As a result, women hold 23% more assets in balanced funds, 12% more assets in target-date funds, and they’re up to 50% less digitally active on the trade markets.

These strategies tend to work out quite well for women. Once they have the confidence that they can be invested in the market, they can go in, make good choices, and stay the course for the long term.

 

Divorce Challenges

Often after a divorce, women who had taken a backseat on finances now find themselves in the driver’s seat wondering, “How do I build confidence? How do I build my knowledge base? How do I get to a situation where I understand what I’m doing and feel in control?”

Here at EP Wealth, we have financial planners who are experts in divorce transitions. We can run through a financial plan, separate and sort assets, and look at the potential long-term impact.

One common mistake is that women automatically say, “I want the house” because they have kids to raise or feel attached to the home—and leave the 401(k) untouched. But a U.S. Government Accountability Office study found that women’s household income tends to fall 41% after a divorce or separation over 50, whereas men’s household income only drops 23%.

So, it’s always best to conduct the analysis, model out different scenarios, and walk through your choices. Sometimes it makes more sense to take some of those tax-preferred dollars we can’t access now because it may pay more down the road.

 

Career Change Challenges

Often EP Wealth advisors meet with women professionals who reach a stage where they’re unhappy with their jobs and want to transition into something less stressful or take a few years off. In 2021, 48% of women were contemplating a career change—particularly one with greater flexibility to work from home. We can help you navigate the whole financial planning process before you take the leap.

 

Retirement Challenges

Another fear women have is this vision of running out of money after retirement and becoming the stereotype of a penniless old lady. The reality is that women tend to live at least some of their lives alone. On average, U.S. women tend to live 5.7 years past men. So if your husband dies first, what will you do? While it can seem morbid to dwell on the possibility, this type of financial planning is too vital to overlook.

Working with an advisor, you can build a plan with cash flow to age 100, including what your taxes, medical care, and other expenses are likely to cost.

Factors can change and financial plans are never a “one and done” type deal, so it’s always good to have someone in your life who can remind you to take regular financial health assessments, help you develop a plan for consistent long-term savings, and can give you the confidence to stay the course when necessary.

 

Overcoming These Challenges Early

Here are a few additional financial education tips to consider if you’re a professional working woman:

  • If your company offers a 401(k), take it—and go to the participant training courses.
  • Put your money in, but also ask questions. Most plans start off conservative, but is it right for you?
  • Educate yourself—not with books specifically targeting women, which tend to be condescending—but something like The One Page Financial Plan.
  • Gamify your goals into a fun challenge: How much can you pay down or set aside each month?
  • If you want to have Sunday brunch, have Sunday brunch! Finances aren’t just about scrimping and saving; it’s also about using your money to improve your quality of life and well-being.

 

Despite all the obstacles professional women may have to face, understanding and taking charge of personal finances doesn’t have to be one of them. By simplifying complex ideas, educating you on your financial planning choices and empowering you to make the best decisions possible, they help create a light at the end of the tunnel and peace of mind when it comes to your financial future. As social psychologist Amy Caddy puts it, your body language shapes who you are -- if you’re ready to take a seat at the table (and take up space when you get there), contact an EP Wealth Advisor today – because you’ve earned it, and you’re worth it.

 

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