Personal Finance

Stay involved in managing finances

Teresa Weintraub
Teresa Weintraub

Over my years as a wealth advisor, I’ve found that women and men ultimately have the same objectives when planning their finances — to grow and preserve their wealth as much as possible and sustain it for future generations. I always have seen that good communication and planning play a critical role in successfully reaching financial goals.

Discussions about finances can be uncomfortable. But money should not be an impolite topic. When it’s treated this way, more often than not, it means women are less informed about the family’s wealth, especially since men are still the predominant bread-winners.

In general, women who don’t take an active role risk missing out on deductions, tax breaks, and savings. Women of all ages should play a meaningful role in planning their estates and managing their finances.

When clients fail to think ahead and actively participate in their tax and estate plans, the repercussions can severely impact their lives. In particular, I’ve seen this dynamic play out with women, who are at times less engaged in the process than they should be. In other cases, women have simply faced unique life events or social inequities that require their money to be handled differently and found that some may not be aware of how to best control and structure their assets.

In recent decades, women have become a larger part of the workforce, enjoying higher salaries and, in many cases, become the primary source of investable assets. In 43 percent of dual income households, women are actually out earning their husbands.

But for many women who lack confidence about these issues, or simply grew up in more traditional households where men typically handled the finances, taking an active role in the family’s finances can feel daunting. Without active participation in their households’ financial life, these women can find themselves at a serious disadvantage as their circumstances change and they realize they are profoundly unaware of what they own.

Some of the more difficult situations I’ve encountered are women who have deferred all the financial decisions to their husband right up until his death, and are left scrambling to understand the state of their affairs during a time of mourning. They are in the dark about how much money they have and what their liabilities are. They may not know where and how their assets are held, or what retirement funds remain. At best they are faced with a multitude of stressful decisions at an already painful time. In some cases, they must dramatically scale back their lifestyle, leaving them feeling overwhelmed.

In one case, a woman wasn’t aware that when her husband died, his pension would end — leaving her with far less income than she expected. In another, the couple together had failed to create a budget in keeping with their retirement income, leaving them with relatively few assets but with many more years to live.

In some cases, I’ve even had to show a woman how to balance a checkbook.

Thankfully, that scenario is increasingly rare. Women have begun to feel empowered with their money, and have learned to make well-informed decisions about planning estates and building retirement funds. But for those who are just learning the basics, there are certain steps they should take to ensure their goals are met. There are inquiries that should be made throughout a marriage, and not just as retirement approaches.

Here’s my advice:

▪  Understand the financial picture: Understand how much is set aside for savings, what the household debts are, and what their partner’s compensation is, including any stock options. The could should then create a budget that includes a line item for every expense they’d like covered in their ideal retirement lifestyle, from healthcare and mortgage payments to gifts and vacations.

▪  Align with reality: First, couples should pare the expenses to match the assets they actually have. But the review shouldn’t stop there. They should revisit that budget routinely with their partner and update it whenever their financial situation changes, ensuring that they revise any contingency plans accordingly.

▪  Schedule regular couples “business meetings”: Spouses should schedule a time to review this information in a non-confrontational manner, and designate a safe, accessible place in the home to store all financial documents, with any computer files backed up with hard copies. Couples should also discuss what’s in each other’s wills, how they are dividing up their estate, and whether they want to leave a legacy through charity. Once the estate plan is created, they may wish to share these plans with grown children.

▪  Review real estate holdings: Pay particular attention to how a title is held —whether it’s in one both spouses’ names. If property is owned in multiple states, women should understand how those states treat property owned by a married couple if one spouse dies.

▪  Get to know financial advisors: It’s important for women to get to know the family’s advisors. That means attending meetings with financial planners, investment advisors, lawyers and tax accountants. Any professional advisor will be glad to hear from a client, and should be happy to help explain account statements, answer questions or take any other steps to increase financial literacy.

▪  Divorce happens: Today, 40 percent of women are divorced. Unfortunately, divorce tends to have a bigger impact on women than on men, with women experiencing a 26 percent decrease in household income compared with 15 percent for men. For example, newly divorced women who are still single often don’t realize they may be able to claim Social Security benefits based on their former spouse’s earnings.

▪  Plan for career disruption: Women are more frequently faced with disruptions to their work because they tend to take time off or work shorter hours to raise their families or to take care of parents. For younger women beginning their careers, saving early is a great way to hedge against future events, and prepare for any plans to temporarily downsize or depart from the workforce. If possible, they should make the maximum contribution to their workplace retirement plan. If they are eligible, they should funnel additional funds into a traditional or Roth IRA.

Women who are unable to contribute to a deductible IRA because of their income levels or coverage by an employer-provided retirement plan should consider a non-deductible IRA. However, they should be aware they will have to fund it with after-tax dollars and potentially pay taxes on withdrawals in retirement. Women who start a business or work part-time during their caregiving years can take advantage of the opportunity to add pre-tax earnings to one of several kinds of small business retirement plans.

▪  Even non-working women can save for retirement. There are other ways to continue saving during nonworking years. Women with working spouses can make tax deductible (or nondeductible) contributions of up to $5,500, and $6,500 for those age 50 and over, to a spousal IRA as long as their partners make enough to cover the contribution and the couple files jointly.

▪  Plan for longevity: Because women, on average, live 4.8 years longer than men, they need additional retirement planning. I see women who fail to take full advantage of 401(k) plans early in their careers. Women, especially married ones, often forego retirement plan contributions to capture current income. Women’s pensions and Social Security benefits also tend to suffer more from family-related career interruptions for children and elderly parents.

Additionally, women tend to behave more conservatively when investing in retirement funds because of concerns they will outlive their partner. But if not done wisely, a conservative approach can sometimes mean insufficient income later in life. That’s compounded by the reality that women still earn only about 80 percent of what men make for the same work, meaning they generate fewer dollars for employer matching contributions. It’s especially important for them to also make decisions ahead of time about future care, such as whether they want to remain in their home, and to determine whether their insurance policies will sustain them.

Teresa Weintraub is president and CEO of Fiduciary Trust International of the South.Fiduciary Trust Company International, a global investment management firm serving individuals, families, endowments and foundations.