Who is your financial role model? If you’re married and said your spouse, you may want to rethink your answer. The latest CNBC Survey found that 20% of married men said their partner or their spouse. But women said 32% are much more likely to rely on their significant other. For women, that can be a problem because the financial stakes for them are higher. They typically earn less and are more likely to take time out of the workforce. Women have a challenge to contend with: longer life spans.
Leaving financial planning to a spouse or significant other is not necessarily a problem. You can divide responsibilities. The problem is when one person takes that responsibility and the other one is not involved. When a female client in her late 40’s or later gets divorced or loses her spouse and her former husband handled all of the money – including the bills, taxes and investing – for more than 25 years, she’s literally been out of the loop. Now, she recognizes that she should’ve been engaged. 58% of women leave big money decisions up to their spouses. When a husband passes away, the surviving spouse is unprepared to take over the finances. This can and should be prevented by making an effort to get involved starting today.
Research found that dual- earning couples with just one partner saving fell short of the money they should put aside for both of them. These individual savers do not seem to realize that they need to pick up the slack for their spouse, the research said. Part of that can be attributed to retirement plan features – such as automatic enrollment and employer matches – which nudge employees to save at rates based on themselves alone, the study said. Beyond workplace retirement plans, one opportunity for savings that single earners may overlook is spousal IRA’s. Those accounts let you invest up to $6,500 per year for a nonworking spouse’s retirement. Those age 50 and over can contribute as much as $7,500.
A couple should decide jointly when to claim Social Security benefits for each partner. If they don’t plan for both spouses, they could leave money on the table. For those couples, claiming early can have an adverse effect, reducing the higher-earning spouse’s benefits, and thus triggering lower spousal benefits for their partner. Plus, time spent out of the workforce can reduce women’s own benefits. For couples and individuals, that means they need to plan carefully when deciding which Social Security claiming strategy best suits them.
Call Lifeguard Financial for a copy of your custom Social Security Maximization Report or published articles on Women and Investing.