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An Age-by-Age Guide: Key Financial Questions Every Woman Should Ask

Use our answers to help you take charge of your financial future

YOUR MONEY SHOULD BE WORKING HARD to help you create a secure financial future. That’s true for everyone—but maximizing financial power is even more important for women, who can face such hurdles as the wage gap, career breaks to take care of family, higher health care costs and the likelihood of a longer retirement, says Lorna Sabbia, head of Retirement & Personal Wealth Solutions, Bank of America Merrill Lynch.

“Those challenges make it necessary to pay careful attention to every financial decision you make,” she says. Use the following questions—and answers—as a starting point for thinking about how you can put your money to best use at every stage of your life.

your 20s and 30s

These are critical years for you to save toward your retirement, because starting to save as early as possible allows your money the greatest amount of time to compound—which is perhaps the most critical factor in accumulating enough to retire comfortably.

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How do I get comfortable with—and knowledgeable about—investing?

“Just talking about money with friends can be powerful and empowering. Talk leads to action.”—Lorna Sabbia, head of Retirement & Personal Wealth Solutions, Bank of America Merrill Lynch

Forty-one percent of the women surveyed for “Women and Financial Wellness: Beyond the Bottom Line,” a 2017 Merrill Lynch study conducted in partnership with Age Wave, said that “they wish they had invested more of their money” and only about half (52%, compared with 68% of men) said they felt confident about investing. “Just talking about money with friends can be powerful and empowering,” says Lorna Sabbia, head of Retirement & Personal Wealth Solutions, Bank of America Merrill Lynch. “Talk leads to action.”

To get the conversation going, you might start an investing book club or circle discussion group. A money-circle group gives you and your friends the opportunity to share financial goals and ideas, ask questions and learn from one another.

You can also try creating a stock watch list online. Check the performance of the stocks you’ve selected on a weekly basis. It costs you nothing to do that—and it’s a great way to begin to get a sense of how the stock market works.

My employer offers a 401(k) plan—how much of my salary do I need to put away for my future?

Ideally, you should try to save at least 15% of your salary every year. This is particularly sound advice for women, who live longer than men and can be at risk of outliving their assets. But the wage gap can make saving difficult. Last year women earned 82% of what men earned, according to a Pew Research Center analysis.1 “That puts women at a retirement savings disadvantage,” says Lorna Sabbia, head of Retirement & Personal Wealth Solutions, Bank of America Merrill Lynch. If you’re earning less, you’re likely to save less as a result.

“Try to increase your savings a little every year—when you get a raise, increase the amount you put away for your future.”—Lorna Sabbia, head of Retirement & Personal Wealth Solutions, Bank of America Merrill Lynch

Sabbia recommends sharpening your negotiating skills. “Then ask for a raise, if you think you deserve one. Try to put as much away as you can toward your retirement—you’ll be glad to have the financial resources you need when you reach retirement.”

If 15% isn’t possible, at least see if you can contribute enough to qualify for the full match, if your employer offers one. Many employers require you to put in between 4% and 6% of your pay to get the maximum match. “It’s like free money,” notes Sabbia, “so do your best to capture it.” And then try to increase your savings a little every year—when you get a raise, increase the amount you put away for your future.

If I marry, should I keep my finances separate from my spouse’s?

This is a tricky one. It’s certainly appropriate to have joint accounts and a mortgage in both your names. And separation of money can trigger feelings that one partner doesn't trust the other. But generally, it’s smart to keep separate retirement accounts, a bank account, and at least one credit card—plus a utility bill—in your own name.

“There are several reasons for the ‘me, you and us’ approach.”—Kirstin Hill, managing director, Global Wealth and Investment Management at Bank of America Merrill Lynch

There are several reasons for the “me, you and us” approach, says Kirstin Hill, managing director, Global Wealth and Investment Management at Bank of America Merrill Lynch. It’s important to preserve your access to your own spending money. It’s also not unusual for couples to have different investing styles—you may prefer to invest more aggressively than your spouse, for instance—and having your own brokerage account allows you to express that style. It’s critical to maintain a financial identity in your own name for another important reason, as well: Should the unthinkable happen and you divorce or become widowed, having a solid credit history and financial accounts in your name can help smooth the way as you transition to a solo financial life again.

Can I afford to be a stay-at-home mom for a while? Will that hurt my career and my future financial security?

Chances are you can, as long as you and your spouse have planned ahead financially. If you’re thinking of taking a career break, it’s a good idea to sit down with an advisor and discuss the impact relying on one income, instead of two, might have on your family’s finances. Keep in mind that during that period you won’t be socking away money for retirement through an employer plan. What you can do, says Kirstin Hill, managing director, Global Wealth and Investment Management at Bank of America Merrill Lynch, is have your spouse contribute to a spousal IRA, instead.

Staying in touch professionally by attending conferences or consulting can help you if or when you decide to re-enter the workforce, she adds. Read “Can You Afford to Be a Stay-at-Home Parent?” for more insights.

your 40s and 50s

Your life is whizzing ahead, both personally and professionally. You may be married, raising young children, managing the household finances, funding college tuitions, paying a mortgage, and tending to a demanding career. As the pressures on your finances multiply, how can you keep up with funding your future?

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At this stage of my financial life, I feel like I could benefit from working with a financial advisor. How do I find one I can trust?

“Look for an advisor who’ll listen and answer questions without making you feel inadequate.”—Lorna Sabbia, head of Retirement & Personal Wealth Solutions, Bank of America Merrill Lynch

It’s a good idea to work with someone who has experience dealing with the financial issues that concern you—and who can help you articulate your goals and priorities. Look for an advisor who’ll listen and answer questions without making you feel inadequate, says Lorna Sabbia, head of Retirement & Personal Wealth Solutions, Bank of America Merrill Lynch. You want someone to whom you can talk openly about your life, not just your money.

A good advisor will understand your whole picture—your caregiving demands, your career, your financial goals (which might be different from your partner’s), your philanthropic interests, and your risk tolerance. Feel free to interview a couple of advisors to find one you trust and feel comfortable with. Remember: you’re interviewing them, not the other way around.

Print out this checklist, “7 Questions Every Advisor Should Be Able to Answer,” to use as a guide during the interview process.

How can I put aside money for my child’s education while still saving for my own retirement?

Women tend to put their family’s financial priorities first: according to “Women and Financial Wellness: Beyond the Bottom Line,” a 2017 Merrill Lynch study conducted in partnership with Age Wave, 77% of women say they see money in terms of what it can do for their families. But you can’t shortchange your future self in the bargain. A 2018 Merrill Lynch study, “The Financial Journey of Modern Parenting: Joy, Complexity and Sacrifice,” found that 72% of parents put their children’s interests ahead of their own needs to save for retirement. Remember, your child can take out loans for college—no one is going to lend you money to fund your retirement.

If you can only contribute to one plan, make your retirement your priority.

Ask your financial advisor—or find an online calculator—to help you estimate how much you need to save for both goals. Then consider opening a Roth or traditional IRA if you qualify, and start a tax-sheltered 529 college savings account as well. Even if you start out gradually, make your savings automatic. Split your raises between your retirement and college savings plans. If you can only contribute to one, make your retirement your priority.

The 529 money can be used tax-free for education costs, and you may be able to get a state tax deduction depending on where you live. “These state-sponsored accounts let you invest in portfolios that are made up of stocks, bonds or money-market securities, offering the potential for appreciation over the years,” explains Richard Polimeni, director of Educational Service Programs at Bank of America Merrill Lynch. Check out “Saving for School? How 529s Work” and “The Basics Q&A: Roth or Traditional IRA—Which Is Right for Me?” for more insights.

My marriage is shaky—are there financial moves I should make right now, just in case?

The financial implications of divorce can be significant for women: according to a report from the U.S. Government Accountability Office2, women’s household income fell by 41% following a divorce or separation after age 50, while men’s household income dropped by only 23%. Even if things are just starting to get rocky, it’s a good idea to seek out advice from an attorney specializing in matrimonial law.

A financial advisor can help you figure out how much money you have and how much you’ll need going forward.

The legal issues and conventions vary widely from state to state, so don’t rely on advice from your friend across the country. You might consider talking with a financial advisor, who can help you figure out how much money you have and how much you’ll need going forward, suggests Kirstin Hill, managing director, Global Wealth and Investment Management at Bank of America Merrill Lynch.

Also, don’t forget about your and your spouse’s retirement accounts. They’re probably worth far more to your future financial security than, say, your home, so be clearheaded about how you divvy them up. For more insights, read “Divorce in Mid-Life: Fresh Starts, New Financial Challenges for Women.

What’s the best way to care for my elderly parents without jeopardizing my own financial security?

“Don’t be afraid to ask your family and financial advisor for help.”—Cynthia Hutchins, director of financial gerontology, Merrill Lynch Wealth Management

When it comes to caring for sick or elderly family members, women are significantly more likely than men to become caregivers. And this can come with a hefty price tag—up to $324,000 in lost wages and benefits according to “The Journey of Caregiving: Honor, Responsibility and Financial Complexity,” a 2017 Merrill Lynch study conducted in partnership with Age Wave. For some, caregiving can also be a cause of early retirement.

To ensure that you’re able to handle the responsibilities of caregiving without sacrificing your financial security, “talk to your family to lay out a plan, assess your current financial situation and don’t be afraid to ask your family and financial advisor for help,” suggests Cynthia Hutchins, director of financial gerontology at Merrill Lynch Wealth Management. For more insights, check out “What Caregiving Costs Women.”

your 60s and beyond

At this stage, perhaps you’re eyeing retirement, ramping up travel or time with grandchildren, pursuing hobbies, starting your own small business, or getting involved in philanthropic endeavors that help you give back and find meaning.

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Could it help me financially to continue working past the traditional retirement age?

Working a few years longer can help you boost your income in retirement.

A large number of women are working in full-time jobs past their 60s and even into their 70s, according to the study “Women Working Longer: Facts and Some Explanations,” by Harvard economists Claudia Goldin and Lawrence F. Katz.3 In fact, the U.S. Bureau of Labor Statistics projects that by the end of this decade, about 20% of women over 65 will be in the labor force.

“If you enjoy your work and are up to it physically, it can allow you to keep making money, saving in retirement accounts, and avoiding pulling out your savings for living costs,” says Cynthia Hutchins, director of financial gerontology at Merrill Lynch Wealth Management. Working a few years longer can help you boost your income in retirement. Plus, you may also get employer-supplied health insurance—helping you postpone using your savings to cover health costs. A bonus: Studies show that the social and mental engagement of work is mentally and physically beneficial.

When should I apply to receive my Social Security benefits?

“Because many women are living into their 90s—or beyond—it’s more important than ever to maximize Social Security benefits.”—Lorna Sabbia, head of Retirement & Personal Wealth Solutions, Bank of America Merrill Lynch

Because many women are living into their 90s—or beyond—it’s more important than ever to maximize Social Security benefits, says Lorna Sabbia, head of Retirement & Personal Wealth Solutions, Bank of America Merrill Lynch. You can, of course, claim your “full” benefit at age 66, but for each year you wait after that, up to age 70, your monthly benefit increases nearly 8%. So if you can afford to hold off, you probably should.

That said, everyone’s situation is different, and it pays to think through all the options. Each spouse in a couple, for instance, may be able to claim benefits based either on their own work record or on 50% of their spouse’s benefit. For couples with large differences in earnings, claiming the spousal benefit may be better than claiming your own, says Sabbia. In cases where both spouses receive benefits, when one partner dies, only the higher of the two benefit amounts continues as a survivor benefit. Start the process by viewing your earnings record and projected benefits at www.ssa.gov. For more insights, check out “Social Security: Aiming for Smarter Payments.

Should I consider my future health care costs when planning my retirement?

“Consider opening a Health Savings Account (HSA), if you haven’t already, for the tax advantages they offer.”—Cynthia Hutchins, director of financial gerontology, Merrill Lynch Wealth Management

Women’s health care costs are typically 39% higher than men’s during retirement, according to the Merrill Lynch/Age Wave study “Women and Financial Wellness: Beyond the Bottom Line.” What’s more, Inquiry Journal research shows that 79% of women require long-term care at some point in their lives.4 So having a plan in place to cover your future medical costs is a good idea.

Account for them in your overall retirement planning and investment strategy, says Cynthia Hutchins, director of financial gerontology at Merrill Lynch Wealth Management. “You can also consider opening a Health Savings Account (HSA), if you haven’t already done so for the tax advantages they offer,” she adds. Once you file for Medicare at age 65, you’ll no longer be able to contribute to the HSA, but the funds invested in the account will continue to have the potential for growth, to help you pay for eligible health care expenses. For more insights, check out “By the Numbers: Will You Need Long-Term Care?”

What if I become a widow? How can I help ensure that I’ll be financially secure as I move forward alone?

“While it’s difficult to prepare for the emotional impact of losing your spouse, there are steps you can take now, as a couple, to prepare.”—Cynthia Hutchins, director of financial gerontology, Merrill Lynch Wealth Management

Women are 3.5 times more likely to become widowed than men, according to 2018 widowhood research conducted by Merrill Lynch, in partnership with Age Wave.5 “While it’s difficult to prepare for the emotional impact of losing your spouse, there are steps you can take as a couple now to ensure that you are financially prepared for the next phase of your life,” says Cynthia Hutchins, director of financial gerontology at Merrill Lynch Wealth Management. “Make sure that you both have easy access to all financial accounts and important papers. Create a will, assign power of attorney and confirm the beneficiary designations on your insurance and retirement plans.”

For more tips on how to prepare, print our checklist, “The Finances of Widowhood: Plan Ahead to Help Your Spouse Manage Loss.” Finally, take heart: According to the Merrill Lynch/Age Wave research on widowhood, 77% of widows discover courage they never knew they had while preparing to move forward after the loss of their spouse.6 For more insights, check out “Widowhood: The Loss Couples Rarely Plan for—and Should.

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Pew Research Center, 2018, http://www.pewresearch.org/fact-tank/2018/04/09/gender-pay-gap-facts/
2 U.S. Government Accountability Office, 2017, https://www.gao.gov/assets/690/687797.pdf
3 The National Bureau of Economic Research, 2018
4 Inquiry Journal, 2005, http://journals.sagepub.com/doi/abs/10.5034/inquiryjrnl_42.4.335
5 Merrill Lynch/Age Wave Widowhood Research, 2018
6 Ibid

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