How to Steer Clear of Common Financial Pitfalls

Content Type: Article

For women, it’s time to look closely at investing strategies, health-care costs, debt and more.

When it comes to financial planning, the stakes are high for women. We earn less on average than men do, and we are more likely to take breaks to care for our families—both of which can leave us with smaller retirement plan balances. Yet given women’s longer life expectancies, we need to stretch our savings further. Here are five common financial challenges women face—and tips for overcoming them.

Lower Earnings

According to Pew Research, women earned 82% of what men made in 2022. Th is pay gap can make planning for retirement tougher since even seemingly small differences in the amount of disposable income you have available to save can have a significant impact on your retirement nest egg.

What to do: Be active. That means don’t wait to ask for a raise or promotion that you deserve. It also means that you shouldn’t use your previous salary range as a benchmark—research what is competitive. And always get a competing off er so you can negotiate.

A Later Start

Women tend to start saving later than men do—and are less likely to save at all. A 2022 survey by Transamerica found that 72% of working women are saving in a workplace retirement plan, compared to 82% of men. Th e impact of a late start can be significant. Using the 401(k) calculator on regions.com, [link: https://www.regions.com/insights/personal/retirement-calculators/how-much-should-i-put-in-my-401k] we estimate that a woman who contributes 10% of her $75,000 annual salary for 30 years (adjusting for inflation) could retire at 65 with $656,000 in savings. By starting five years earlier, her retirement savings would be more than $923,000.

What to do: Start saving whatever you can, particularly if your employer matches your contributions. Then increase your contribution rate by 1% of your income every year.

Investing Too Conservatively

An S&P Global survey found that only 26% of American women own stocks, favoring cash or cash equivalents like bonds and money market accounts instead. Investing too cautiously can hold you back over the long term because cash, while low risk, has historically delivered lower returns than stocks.

What to do: Taking appropriate levels of risk may yield more savings in the long run. Work with a Wealth Advisor to assess your risk tolerance and create a portfolio built around your goals.

Higher Health-Care Costs

Women spend far more on health care every year than men do, according to 2019 research by the Kaiser Family Foundation. And because women live longer, they typically spend more on health care in retirement and may need more long-term care later in life.

What to do: With a high-deductible health insurance plan, you can set aside tax-free dollars for health care in a health savings account. Long-term care insurance can help protect against the financial risks of requiring extended care.

Too Much Credit Card Debt

Women tend to have more outstanding debt on credit cards—one of the more costly types of debt you can have. This can have a significant impact on your financial health. According to recent research using Federal Reserve data, single women, on average, experience an 18-point lower credit score than single men with similar demographics.

What to do: Focus on budgeting. Track your spending either with a financial app, a spreadsheet or with old-fashioned pen and paper—if you don’t track it, you can’t improve. Charge only what you can pay off every month and seek out credit cards with low interest rates for when you need to spread payments over time. The more reasonable you are with your spending, the more cash flow you’ll have to invest, whether in your 401(k) or another investment vehicle.