1. The Seven Mistakes Women Make In Their
Financial Planning
Presented by:
Joni Lindquist, MBA, CFP®
KHC Wealth Management
www.makinglifecount.com
www.kcfinancialplanning.com
2. Women and Money Series:
Women, Work and Money Recap
Women have made strides in education levels; still
trail in earnings
Career interruptions, hours worked and the challenge of
work-life balance
Women’s social capital not as strong
Women tend not to negotiate as effectively
Women need to view their human capital as critical
asset
3. Goal = Financial Independence
Human Capital
Financial Capital
Personal Wealth
4. Women at Greater Risk of Not Achieving A
Financially Secure Retirement
Key Contributing Factors:
More likely than men to be single parents
More likely to handle children and/or parent care-taking
A high percentage of women work part-time
Women’s annual income continues to lag behind men’s
Women have longer life expectancies – need greater
savings
5. The Seven Mistakes Women Make in their
Financial Planning
Don’t have a plan
Taking time-outs from work
Not saving enough for financial independence
Investing without a plan
Taking care of others first
Not having adequate insurance
Assuming will work longer
7. Don’t Have a Plan
Most people do not have a comprehensive plan
Less than 1/3 of households (31%) report having a
comprehensive financial plan
44% of households report they are “on track” in saving
for retirement
Those who do plan are more likely to feel “very
confident” about money factors – 52% to 32%
Fewer women are confident about retirement - only 7%
are “very confident”, compared to 13% of men
Certified Financial Planner Board & Consumer Federation, 2012.
8. Women and Financial Planning
Women are Guessing Their Retirement Savings Needs
59%
21%
6%
4%
4%
2%
3%
40%
29%
12%
5%
7%
3%
4%
Guessed
Estimated based on current living expenses
Completed a worksheet/did calculation
Read/heard that is how much is needed
Expected earnings on investments
Amount given to me by financial advisor
Other
Basis of Estimated Retirement Savings Needs
Women Men
10. The Value of Financial Planning
Planners save more
In 2011 those with financial
plans – saved 44% more
money each year
Planners amass more
Those with financial plans
accumulate nearly 250%
more retirement savings
Money Saved
Without Financial Plan
With Financial Plan
Retirement Savings
Forbes, “Not Enough People Have Financial Advisors.”
12. Taking Time-Out from Work
Women more likely to work part-time
Career interruptions
Less access to employer benefits such as retirement
plans
Lower lifetime earnings
Lower lifetime earnings lead to lower Social Security
benefits
13. Taking Time-Out from Work
Women are twice as likely to work part-time as men
55%
76%
45%
24%
Women
Men
Work Full-Time Work Part-Time
14. Taking Time-Out From Work
• NBER study of MBA grads (1990-2006) from Booth
School of Business, University of Chicago
– Males and females have nearly identical labor incomes
at the outset of their careers
– Large differences within 9 years after graduation
– Share of females not employed also rises after
completion
Earnings at
Graduation
Earnings After
9 Years
Men $130k $400k
Women $115k $250k
Source: “The Dynamics of the Gender Gap for Young Professionals in the Corporate and Financial Sectors,” Bertrand, Katz and Goldin, 2009, NBER.
15. Women Less Likely to Have Access to Benefits
74%
82%
46%
61%
76%
43%
All Workers
Full-Time Workers
Part-Time Workers
NET - Employee-Funded Plan
(i.e. 401(k) or Other)
Women
Men
71%
79%
44%
58%
74%
39%
Employee-Funded 401(k) Plan
22%
15%
44%
34%
20%
52%
None of These
17. Not Saving Enough
53% of women have started 65% of men have started
53%47%
Women
Saving
Not Saving
65%
35%
Men
Saving
Not Saving
www.wealthmanagement.com, “Blackrock Finds Gender Gap in Retirement Savings.”
18. Women’s Annual 401k Contributions Lag
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Median Mean
6%
9.3%
8%
9.8%
Women
Men
19. Women Have Less in Savings
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Age 25-44 Age 54-65
$34,900
$81,300
$76,800
$118,400
Women
Men
21. Investing without a Plan
An alarming 22% of women do not know how their
assets are invested
Nearly 1/3 of women would prefer not to think about
retirement investing until later
75% of women feel they do not know as much as they
should about retirement planning and investing
Are women more conservative? Who cares – what
matters is that the investment strategy tie in with the
long-term financial plan
22. Women’s Investing Behavior
Women tend to trade less – and this may in fact improve
their net returns compared to men
In one study, men traded 45% more than women and this
reduced men’s returns by an average of 2.65% compared to
1.72% for women
Just over half (52%) of women describe themselves as
“very involved” in managing/monitoring their
investments
Millennial women appear more active in investing, as
31% describe themselves as active, vs. 15% for baby
boomer women
24. Caring for Others First
Women tend to think and plan for others before
themselves
Women most frequently (26%) cite their single greatest fear
about retirement as not being able to meet the financial needs
of their family
An estimated 66% of caregivers are female
Many parents focus on saving for college for their children
rather than saving for their own retirement.
Women need to put a priority on retirement planning;
there are other options to fund college
Grants, loans, scholarships, community/technical colleges
26. Caring for Others First
Care-giving reduces paid working hours for
middle-aged women by 41%!
In total the cost of caregiving in lost wages and
Social Security benefits equals $324,044
Family Caregiver Alliance, “Women & Caregiving: Facts & Figures.” Updated 2015.
28. Inadequate Insurance
Life Insurance
Lack of coverage – for major bread-winner; for household
Under-insured
Disability Insurance
Lack of coverage
Under-insured
Over-estimating eligibility for Social Security Disability Benefits
29. Gaps in Life Insurance
The number of people with life insurance dropped to
70% from 78% in 2004
Millennials are less likely to have life insurance than boomers
Consumers over-estimate the cost of life insurance
Those with life insurance may be under-insured
40% of Americans with life insurance don’t think they have
enough
The average gap is up to $320,000 – need $540,000; only have
$220,000
Work with a financial professional to understand need
Life Insurance and Market Research Association
30. Lack of Disability Insurance
Disability is much likelier to happen than people expect
Just over 25% of today’s 20 year olds will become disabled
before they retire
One in eight workers will be disabled for five or more years
Over 37 million Americans are classified as disabled in 2012
Yet, most of us (65%) think we have 2% chance or less of
becoming disabled
Council for Disability Awareness
31. Effect of Not Having Disability Insurance
Disability prevents people from earning a living, creating
financial hardship
Medical problems contribute to 62% of all personal bankruptcies
65% of Americans say they could not cover normal living
expenses even for a year if employment income lost
Council for Disability Awareness
32. Chances of Becoming Disabled
“Typical” female – age 35 with healthy lifestyle has 24%
chance of becoming disabled for 3 months or longer
• With a 38% chance of being disabled longer than 5 years
“Typical” male – age 35, healthy lifestyle has a 21%
chance of becoming disabled for 3 months or longer
With a 38% chance of being disable longer than 5 years
Council for Disability Awareness
33. Don’t Rely on Social Security or Worker’s Comp
Social Security
65% of initial SSDI claim applications were denied in 2012
The average monthly benefit from SSDI was $1,130 per month:
• Average for Males = $1,256
• Average for Females = $993
Worker’s Comp
Less than 5% of disabling accidents and illnesses are work
related
Council for Disability Awareness
35. Assuming You Will Work Longer
People end up retiring sooner than expected
Finding work after retirement is more difficult than
expected
Women don’t have back-up plans
36. Assuming You Will Work Longer
Nearly half of workers (49%) find themselves retiring sooner than
planned
Employee Benefits Research Institute, March 2014.
0%
5%
10%
15%
20%
25%
30%
35%
Before age 60 Between ages
60-64
Age 65 Age 66-69 Age 70 & older
9%
18%
23%
11%
22%
35%
32%
11%
7%
9%
Workers planning to retire
Workers actually retiring
37. The Reality of Working after “Retirement”
65% of people retiring are
planning to work for pay
in retirement
• Only 27% actually are
working
Employee Benefits Research Institute, March 2014.
65% 27%
38. Most Baby Boomer Women
Don’t Have Back-up Plan
If they are forced to retire sooner than planned from primary career
20%60%
20%
Women
26%62%
12%
Men
Yes
No
Not Sure
40. Seven Tips for Developing a Successful Plan
1) Develop a written plan – don’t guess!
Work with a Certified Financial Planner (CFP®) practitioner
Clarify goals, take action, monitor
Adjust as life changes
2) When making decisions about reducing work hours,
understand and plan for the financial trade-offs
Adjust goals, prioritize
Build expense plans
3) Within your plan, set savings target and save at this level
41. Seven Tips for Developing a Successful Plan
4) If employer has retirement plan, participate. Make
retirement a priority over college funding.
There are other ways to pay for college; there are no other ways
to pay for retirement
5) Get engaged and educated about investments
6) Ensure you have adequate life and disability insurance
7) Have a backup plan
