International Women's (Finance) Day: Another Way to Equality

Today, March 8, is the day we observe International Women’s Day, a worldwide event that celebrates women’s achievements-from the political to the social-while calling for gender equality.  As a female financial planner, I find it disturbing that one of the first articles I read this morning details how, even in this time of female independence, success, and achievement, many women continue to defer to their spouses on big financial decisions. 

According to a UBS survey of high net worth women (married, divorced, or widowed), while 85% manage their day to day money, fewer than a quarter of these women take charge of long-term planning decisions.   Personally, I find that to be an alarming statistic that has far reaching implications in today’s society and economy.  Women need to be financially literate so that they can address their own financial needs in the wake of an unexpected life-changing event.  Whether it be through divorce or the death of a spouse, many women may find themselves unexpectedly thrust into managing their financial futures on their own, relying on the advice of family, friends, or people like me.   And while all three of these informational sources are hopefully well-intentioned, without a solid foundation, these newly single women can be overwhelmed with the magnitude of decisions they face and the uncertainty of knowing whether the guidance they receive is the best for them.

Women don’t have to be high net worth to have a need to be continuously involved in making decisions that impact their futures.   In fact, I’d almost argue that it’s those in the middle classes that can be most at risk when you consider that couples plan for a retirement that generally has two sources of income and savings and one household of expense.  In the case of divorce, you halve the income and increase the expense, often resulting in a lower standard of living for both parties, but often more so for the woman, particularly if she had been a stay-at-home mother.  Specifically, making the decision to opt out of the workplace to raise a family results in reduced retirement savings opportunities.  For example, under current tax law an employee can defer $19,000 of salary to a 401k, but the maximum IRA contribution for the unemployed spouse is $6,000.  Women who remain in the workplace can personally save over 300% more toward their own retirement each year, and while it would be nice to think that all marital assets are fairly divided in the case of divorce, there is no guarantee of this. 

In the case of widowhood, the monetary impact may not be as severe, although income can certainly decrease.In my experience, it’s often not an economic burden widows face, but an educational hurdle.  Women who were not involved in the financial decisions throughout their marriages often don’t feel they understand how their husbands made financial choices and are often uncomfortable making changes. This uncertainty can arise from a combination of respect for their deceased husband’s memory and intellect and also from being fearful that a change they make could counter the plans their late husbands put into place.  When you don’t know the thought process behind the long-term planning, it’s understandably daunting to make changes, especially when you trusted your spouse and now may be turning to advice from relative strangers.

The UBS study goes on to say that the main reason given for women abdicating financial decisions to their husbands is the women’s assumptions that their spouses know more about long-term finances, and that younger women are even more willing than older women to leave investing and financial planning decisions to their spouses.Understandably, the younger women often felt overwhelmed by the day to day management of lives with young children, leaving little mental “time” to focus on the long-term. 

However, with the proliferation of educational materials related to finances, women have more opportunity than ever to take an active role in planning for their futures.  A good financial planner will make sure that all parties understand not only the plan, but how the plan was developed.Both the husband and wife should be party to the decisions being made. 

I believe all women, whether single or married, “rich” or not, should know how their financial futures are set to unfold.There’s too much at stake to let someone else make those decisions for you.

Written by Teri Christensen, MBA, CFP®