While millennial women are breaking cultural norms and diving into entrepreneurship headfirst, baby boomers are often more reluctant to take the risks of their younger colleagues. In fact, on a whole, women invest 40 percent less[i] than men and own just 39 percent[ii] of privately held firms.
This is despite the fact that women consistently outperform men when it comes to earning a return on their investments, averaging 40 basis points ahead, and adding 12.4 percent to their investment balance, compared to just 11.6 percent for men. In fact, the truth is 35 percent[iii] of women are financial planners and a whopping 60 percent[iv] of accountants are women.
While no one can fairly accuse women of lacking financial literacy and investment prowess, financial confidence remains a pressing issue. Thankfully, financial education can go a long way toward combatting this. So, whether you’re an investment veteran who needs to do a bit of fact-checking, or you’re just thinking about getting started, here is a brief financial guide for women who are baby boomers.
New Job Advice
If you are starting a new job after 50 years old and the compensation package offers a cafeteria plan, prioritize retirement benefits over current financial success when building your compensation package. This may mean downsizing, but the payoff in peace of mind and financial freedom after retirement is worth it.
Managing Credit Card Debt
One major side effect of the income gap between men and women is that women do tend to carry more credit card debt[v]. When it comes to paying off this and any other type of debt, the key rule to remember is that the sooner you pay off that debt, the less additional dollars you pay in interest. Always make paying off debt a top priority when setting financial goals.
Saving for Retirement
If you’re only just trying to play catch up, know that you are not alone. An average of 10,000 baby boomers are retiring each day, and 26 percent report they have saved less than $50,000[vi] for retirement. Here are a few ways you can boost your retirement savings:
- Hone your skills and build a portfolio, so you may consult in your field after retirement.
- Start an IRA account to boost your 401(k) savings.
- Purchase an investment property to generate passive income.
- Invest in stocks and bonds.
Invest Some of Your Savings
Investing is one of the best decisions that all women can make to help bridge the income disparity gap. To increase the likelihood of success, women who do not have a financial background should also consider working with a wealth strategist to steer you in the right direction. Even if you do have experience working in finance, having someone else to bounce investment plans and ideas off is always beneficial. Forbes estimates that working with an adviser can add up to 6 percent[vii] in additional annual returns to your portfolio.
As baby boomers begin to accrue more assets, to ensure you keep them, you must protect them. The methods available to you will depend on the types of assets you hold, whether you own them independently or jointly and the laws in the state where you live. However, here a few general tips you can keep in mind:
- If you own a business, separate your business accounts from your personal accounts and increase your liability insurance[viii].
- If you are getting married, consider a prenuptial agreement, especially if you both have children from prior relationships.
- Create a power of attorney to ensure your assets are properly tended to, if you become ill or are temporarily incapacitated.
- Work with a wealth strategist to help you navigate the specific asset protection laws applicable to your state or locality.
Estate planning is an uncomfortable two words for just about anyone. It is most intimidating for baby boomers who are either approaching retirement or currently retired. However, it is a necessary part of financial planning. Here are some tips to keep in mind:
- If you still have a lot of debt, name your child or someone else close to you as the beneficiary on your IRA. This will help to protect it from creditors after your passing.
- Beware of asking the people who should inherit your assets to cosign on loans. At the time of your passing, creditors may hold them liable to pay off all remaining debts on their own.
- As you acquire more and more assets, ensure that your will is updated.
No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy. This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.