Key Takeaways:
- Aligning your money with your values helps you reduce overall financial anxiety and stress and can lead to higher contentment throughout life.
- Setting up systems to measure good financial health can change the game, even if what you are working toward changes over time.
- Clarifying your goals up front can help you work toward them consistently. Slow and steady often wins the race, and your financial life is a marathon – not a sprint
The average woman in the United States lives five years longer than the average man – and that gap increases to seven years internationally. And yet, women and men still aren’t paid equitably in America. Recent studies show that women of color make significantly less for every dollar their male counterparts make, with women as a gender group making an average of 77 cents for every dollar their male counterparts take home.
The Gender Wage Gap is Much Wider for Most Women of Color
Comparing 2020 median earnings of full-time, year-round workers by race/ethnicity and sex
Women are often caretakers – of their children, aging parents, or close friends and relatives. Enduring the pandemic of 2020 (and beyond) has only increased demands on their time, attention, and focus as childcare options dry up and working environments flex and shift. The unfortunate truth is women are likely to live longer but make less throughout their careers than their male counterparts, which can leave them financially behind when they retire.
These combined factors have made it increasingly critical for women to build their wealth early in their careers, with continued focus throughout their lives leading up to retirement. By caring for yourself financially, you can set yourself and your loved ones up for long-term success and stability.
Making Progress
Statistics show that more women are taking control of their finances. By 2028, women will control 75% of discretionary spending worldwide. Furthermore, 44% of women are currently the breadwinners for their homes (and this number is climbing). Other interesting statistics to note:
- 50% of women say they’re more interested in investing since the pandemic
- 62% of women will focus on increasing their understanding of financial planning and investing in the next 12 months
- 67% of women are now investing outside of retirement savings
All of these statistics tell a story: women of today are more confident than ever in their financial lives and they’re laying a strong foundation for future generations.
Ready to take control of your financial life?
This piece explores general “to-dos” and goals for your finances by decade – starting with your 40s. Each decade presents financial challenges that women face, but also offers unique planning opportunities to help them grow toward their goals.
Wealth Growth in Your 40s
In your 40s, you are possibly in a beautiful season of life where you’re hitting your stride at work, making big career moves, or consistently working toward your goals. You’ve likely already started laying the groundwork for a strong financial future. During this decade of your life you can take some key steps to level up.
Check Your Net Worth
Now is a great time to check your net worth statement and it’s a good thing to recalculate once a year. Total all of your assets such as retirement savings, cash accounts, investment accounts, and stock options, among others. Then, total all of your liabilities such as credit card debt, car loans, and your mortgage.
Assets – Liabilities = Your Net Worth
The goal is to have your net worth trend upward over time. Ideally, in your 40s, your net worth is positive. You’ve saved or invested enough to start growing your retirement accounts and have paid down most sources of consumer debt.
Get Clear on Your Goals
You don’t have to know what your day-to-day life will look like in retirement, but it’s good to have a sense of what you’re moving toward. A few general things to consider might be:
- At what age and where you’d like to retire.
- What type of lifestyle might you want in retirement (an encore career, consulting, volunteering, traveling).
- What type of lifestyle goals you have in the near term (selling your home, moving to a different job role or career path, making a major purchase).
- What other financial variables you may need to account for in the meantime (saving in a 529 Plan for a child’s college fund, or financially supporting aging parents).
Set Good Habits
Once you have a clear idea of your net worth and goals, you can create good habits and systems for yourself. These might be:
- Setting up annual financial check-ins to track your net worth and progress.
- Automate your savings contributions towards your goals – paying down debts, building up savings, and investing.
- Check your statements regularly (monthly or quarterly) to make sure you’re spending in alignment with your values and unexpected expenses aren’t creeping up on you.
Lean Into Retirement Savings
Leaning into retirement savings in your 40s can help you set exceptional financial habits while ramping up toward your next chapter. This can look like maxing out your workplace retirement accounts, contributing to a Roth IRA or Roth 401(k), maxing out a Health Savings Account (HSA) or Flexible Spending Account (FSA), and even going beyond traditional retirement savings by opening a brokerage account and continuing to invest there.
By contributing to your investments early in your career (even small amounts), you’ll have a longer runway for your money to earn compound interest and grow into a sizable nest egg by the time you retire.
Build a Financial Community
Surrounding yourself with friends and family who can hold you accountable and encourage you while you work toward your goals is key. Sometimes just talking about money and financial goals with your spouse, partner, or peers can be immensely helpful in reducing financial anxiety and staying on track.
Focus on Career Growth
Pursue career opportunities – now is the time to grow! Whether it’s a promotion at work or moving to a different company that values your unique skill set, you deserve to flourish and thrive during this season. You can focus on new positions that better align with your long-term career goals or negotiate for better compensation in your current role. The groundwork you lay now can benefit you later on.
Wealth Growth in Your 50s
In your 50s, you’re entering a new era of your financial life. You have 10 to 15 critical years until you retire and it’s time to lean in and boost yourself toward your goals.
Check Your Net Worth
This is a recurring theme across every decade of life. Knowing what your net worth is, and working to ensure it’s always trending upward, should be a key component of your financial health. In your 50s, you’re nearing retirement. Even if you aren’t planning to retire in a traditional way, one of your primary goals during these next few years should be to eliminate as much debt as possible. Carrying liabilities into retirement can be detrimental to your cash flow and impede the lifestyle you’re excited to pursue.
Reevaluate Your Cash Flow
During this decade of life, several things are likely in flux:
- You could be at the top of your career game.
- You may be a new empty nester (or planning to be one in the next few years).
- Your parents are aging and you’re actively considering taking a larger role in caring for them.
- Your priorities may be shifting away from being more “career-driven” toward “what might come next” as you look ahead to retirement.
These changes usually mean your cash flow situation has changed. You may have more incoming cash flow than you’re used to and your expenses may shift as you take on a new season of life. For example, you may find your household expenses (groceries, utilities, and entertainment) decrease when your children move out of the house.
Leverage Catch-Up Contributions
When you turn 50, you can contribute extra funds to several retirement savings accounts. In 2023, you can contribute an extra $7,500 to a 401(k), 403(b), Salary Reduction Simplified Employee Pension Plan (SARSEP), and 457(b) plan. You can also contribute an extra $3,500 to a SIMPLE IRA or SIMPLE 401(k), and an extra $1,000 to a Traditional/Roth IRA. While these numbers may seem small now, they add up over time. Maxing out retirement savings can help you move the needle and grow your nest egg to retire the way you prefer.
Explore Equity Compensation
If you haven’t explored equity compensation with your current employer, now may be the time if that’s something made available to you. While being overly concentrated in one company’s stock isn’t always ideal, having equity compensation can help fast-track your financial goals.
With a mindful rebalancing and diversification strategy, you can turn company stock into a critical component of your long-term financial goals. If equity compensation isn’t an option at your current employer, finding positions better able to compensate your unique skill set and align with your financial and lifestyle goals may also be a wise option at this stage in your career.
Ready to take control of your financial life?
Create a Clearer Retirement Plan
As you enter your 50s, retirement may still seem light years away. However, many find the next decade zips by – and before you know it, you’re facing the next chapter of life and career.
For many, the idea of retirement is exciting. They can’t wait to spend their days traveling, pursuing hobbies, or experiencing quality time with family and friends. Others feel a sense of dread as they approach retirement, unsure how they want to spend their time or what their lives will look like without a career to structure their daily lives.
During this decade, focusing on what type of retirement you want can be constructive. To get a better sense of what real-life experiences look like, talk to friends, family members, or colleagues who have taken the leap. Talk with your spouse or partner about your shared goals and identify where you may be both aligned and misaligned.
And by all means, tap into your own instincts to think about how you want to spend your time in retirement. If your career has played a large role in your identity and you find fulfillment in what you do, you can dig deeper to uncover the core values that show up in your daily work life. For example, if you’ve spent 40 years in a nursing career and are passionate about helping others, flipping a switch to traditionally retire may feel jarring. Instead, you could look for part-time opportunities, volunteer work, or even local organizations you’re excited about getting involved in to engage with your community.
There is no “wrong” answer when it comes to planning your ideal retirement. By laying the groundwork now and exploring what type of lifestyle you want, you can help make key financial decisions in the lead-up to retirement over the next 10 to 15 years.
Wealth Growth in Your 60s
In your 60s, you’re finally in the home stretch. You’ve put in the work, navigated countless financial and career ups and downs, and now you’re looking ahead to an amazing next chapter. During this decade, your primary goal is to plan for success as you transition away from your career, while also creating a comfortable “nest” for yourself – both financially and emotionally.
Set Up Your Timeline
Retirement is knocking – are you ready to answer the door? Clearly outlining your retirement timeline can bring clarity to your financial needs and uncover what remaining steps are needed to ensure security before taking the leap. It also lets you explore non-traditional retirement options, like consulting or joining a board of directors.
Finally, setting up a retirement timeline lets you proactively communicate your plans with your employer. Collaborating with superiors or your HR team to create a retirement transition allows you to take the lead and help end your career on a high note.
Evaluate Health Insurance Options
Many retirees assume once they retire they’ll enroll in Medicare and that will be that. Unfortunately, Medicare tends to be significantly more complicated than most people think. It’s essential to understand the ins and outs of Medicare and to explore other health insurance options before you need coverage.
For example, you may find a Medicare Advantage plan that bundles hospital coverage, proactive care coverage, and prescription drug coverage (along with other items like vision or dental), is better for you than “traditional” Medicare.
Focus on Your Mindset
Transitioning to retirement is trickier than many people assume. In fact, according to the National Library of Medicine, almost ⅓ of retirees suffer from some form of depression. Focusing on your mindset prior to retiring can help you navigate some complex emotions as you make the switch:
- Get comfortable going from “accumulation” (savings, financial growth) to “decumulation” (drawing down your savings to live). This change can be upsetting for some, and they may even feel like they’re financially failing.
- Think about your “bucket list” goals – what do you want to accomplish in this new chapter?
- Consider what you’ll do on a random Tuesday morning. Your full retirement won’t be checking bucket list items off every day. Imagine how you’ll spend your average day, not just the “big” moments.
- Talk to your community. Adults spend the majority of their lives at work (or asleep)! Your coworkers and colleagues are people you interact with every day and might make up the bulk of your social circle. Prior to retirement, engage with your community outside of the office to build up your social circle and support network for when your work life shifts.
Consider Your Living Situation
Now is the time to evaluate your housing needs. Many retirees choose to age in place (or not sell their homes). This may mean you look at paying down your mortgage or putting systems in place in your existing home to serve you in this next chapter. For example, a home office may be converted to an art or fitness studio.
Alternatively, you may decide that downsizing or relocating is your best path forward. If this is the case, carefully consider what type of housing you’re interested in. A condo with landscaping and home repair resources may be a perfect fit if you plan to travel often. If you plan to spend time at home pursuing hobbies during retirement, a smaller house in the country near your family (but with space for a garden) may better suit you.
In Conclusion
The years between 40 and 70 pass by quickly, and so much life is lived in these three decades. Knowing what steps to take to grow your wealth can help you to find financial peace during these unique life seasons.
If you have questions about how you can grow your wealth, achieve your goals, and financially thrive, we would love to speak with you. Schedule a call with us today to see how an Abacus advisor can be a trusted partner for your financial journey.
