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November 12

The Unique risks and role of women in financial planning

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As seen in the Bradenton Herald November 12, 2019

As I sat down to write this column, I intended to discuss some of the unique characteristics of planning for women.  The common issue for couples is that at some point one person will need to manage things on his or her own.  Statistically speaking, more often than not this means the woman.

About a decade ago, I was talking to another advisor at an industry conference and was struck by a very simple epiphany.  In twenty plus years of practice I have had many couples and many single women as clients, but I have only had one single man ever as a client.  That single man was the result of losing his wife and he was remarried within a year. 

As I have spoken to other advisors over the years, I have found the same can be said across the industry.  Why is it then that the financial industry directs most of its attention to a man’s point of view?  Unfortunately, this becomes problematic as women transition into widowhood or divorce as many are ill-prepared to take over the finances as they haven’t been given the opportunity or taken the time to learn about personal finance.

An economic benefit of being married is shared expenses.  When a household drops from two participants to one, its expenses don’t drop by half but more likely 20%.  When one participant separates or dies, social security income drops by ½ to 1/3rd.  This is exacerbated when health costs and increasingly expensive end of life care eat into retirement savings.

“Just the facts ma’am”

  • Women have a longer life expectancy than men, outliving men by over five years on average.  Women who reach age 65 can expect to live an average of 20 more years, and those who reach age 75 – an additional 13 years.1
  • More than 2/3rds of Americans age 85 or older are women.2
  • More than 70 percent of nursing home residents are women:  their average age at admission is 80.3
  • Women often have fewer resources and lower net worth in their later years. Women are hit hard by changes to their finances caused by caregiving, divorce, widowhood, and job loss.4

It is normal for every well-functioning marriage to have a division of labor.  I rely on my spouse to handle many important tasks in our household.  The fact is that at some point I need to be prepared to potentially fill in at any given time.  For my wife and women in general, it is especially important that they be informed and an active participant in personal financial management as they likely will be solely responsible for this one day.

If they aren’t already, the women I talk to tell me they really want to know more and become educated around personal finance issues.  They want a personalized strategy that gives them confidence and a sense of security.  They want to know if their money will last, if they’ve covered their bases, and how they might contribute to their family and community. 

You don’t have to know a lot about investing to ask these questions of your advisor.  A good planner should be able to give you answers to your concerns in plain English and construct a solid financial plan to put you on the right track.

Women’s participation in the financial discussion appears very favorable to household economics. A 2001 study, “Boys will be boys” in the Quarterly Journal of Economics showed that women underestimate their abilities around financial knowledge while men greatly overestimated their abilities.  The article further went on to show that women’s portfolios on average outperformed their male counterparts largely because they traded less frequently leading to less transaction costs and taxes.  Also married men tended to outperform single men.  As stated by Larry Swedroe, “It appears to be a common characteristic of human behavior that on average men have confidence in skills they do not have, while women simply know better.”

Gardner Sherrill, CFP, MBA, is a CERTIFIED FINANCIAL PLANNERTM with Sherrill Wealth Management. To learn more visit sherrillwealth.com. The opinions expressed in this material are not intended to provide specific advice or recommendations for any individual. Securities and advisory services offered through LPL Financial a registered investment advisor. Member FINRA/SIPC.

1 National Center for Health Statistics (NCHS). “Health, United States, 2006.” Table 27, Page 176. Data year is 2004.

2 U.S. Census Bureau Estimates. Data year is 2005.

3 AARP Public Policy Institute. Data from the 2004 National Nursing Home Survey.

 4 Women’s Institute for a Secure Retirement


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About the author

Gardner is a CERTIFIED FINANCIAL PLANNER and principal of Sherrill Wealth Management in Bradenton, Florida. He has spent 20+ years in the wealth management field helping families negotiate the various obstacles and opportunities that retirement provides them. Read More

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