Women’s Financial Empowerment on the Rise
Historically, women have faced challenges in accessing financial resources and opportunities, a situation largely driven by the ongoing gender wage gap. Currently, women earn just 80% of what their male counterparts take home.
Nevertheless, women are closing this gap through higher educational attainment and participation in the workforce, often outpacing their male counterparts. This progress has led to improved wages and increased presence in senior leadership roles.
A report from the Bank of America Institute highlights, “The combination of increased wage gains and the upcoming ‘great wealth transfer’ positions women as pivotal drivers of economic growth.” As women’s wealth grows, it will inevitably contribute to expanding overall affluence.
The Forecast for Women’s Wealth in 2030
By 2030, approximately two-thirds of private wealth in the United States is projected to be owned by women, marking the largest wealth transfer by gender in history, according to research by McKinsey.
This wealth transfer can provide a safety net that was previously lacking for many women, as noted by Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida. “While you can’t rely on it entirely, this financial support can alleviate some pressures,” she stated, emphasizing the importance of this transition.
Navigating the Wealth Transfer: Key Considerations
To effectively navigate this historic generational wealth transfer, financial advisor Christa O’Brien from Northwestern Mutual recommends several strategies for women.
Initiate the Discussion: “Many overlook the potential downsides associated with wealth transfers when a proper plan isn’t initiated,” O’Brien explained. Without necessary protections like life insurance or long-term care coverage, debts left behind could significantly reduce the inherited wealth.
“Thus, early planning and involving all beneficiaries in discussions with trusted financial advisors is crucial,” O’Brien said.
Understand Your Location’s Impact: “The type of inheritance you receive—whether it’s a 401(k), life insurance payout, or other assets—has specific tax implications,” O’Brien noted. Every individual’s situation varies, but the primary aim should be minimizing future tax liabilities to safeguard your heirs against substantial bills.
Prepare for Longevity: With women living an average of nearly six years longer than men, it’s vital to develop strategies that ensure savings endure over time. Delaying Social Security benefits can enhance monthly payments and offer better long-term financial stability.
Engaging a financial advisor for comprehensive investment strategies and considering long-term care insurance is also crucial. O’Brien advises, “This proactive approach can better position your beneficiaries during the next wealth transfer.”
Establish Financial Security: Women often have smaller financial reserves than men and typically adopt a more conservative investment approach. Explore options like high-yield savings accounts, Roth IRAs, or money market accounts based on your financial timeline.
“While it’s essential to grow your investments, consider being bolder with funds you don’t require immediately and more cautious with those you may need soon,” O’Brien suggested.
Stay Vigilant Against Scams: Financial scams pose a significant and increasing risk, disproportionately affecting older adults and women. The consequences can be particularly damaging in these demographics.
O’Brien advises maintaining vigilance regarding sharing personal information and thoroughly verifying the credibility of any financial entity before making important decisions.
