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Financial Checklist for Female Investors

Financial Checklist for Female Investors

March 21, 2023

A Financial Checklist Can Help Female Investors Bridge The Retirement Gap

Marquette Payton of Janus Henderson Investors outlines key items women should have on their financial checklists to help ensure they’re on track to their retirement goals in 2023 and beyond.

According to research from the National Institute on Retirement Security (NIRS), women are at a disadvantage compared to men when it comes to retirement savings.1  Women have a longer life expectancy compared to men, which means they need to save more to cover those extra years in retirement.

But life expectancy isn’t the only factor. The U.S. Census Bureau found that the divorce rate among adults 50 years and older has risen over the last several years. When part of a couple leaves the marital home, it’s likely that a significant portion of the marital assets leave as well, which can put a retirement plan into disarray. The same is true when someone loses a spouse and goes from two incomes to one – or maybe even none.

Women are also more likely to take time out of the workforce to care for children, spouses, and aging parents, reducing the amount of income they’re able to funnel into their retirement savings. When they do work, women are more likely to work part time in jobs without a retirement plan.2

The bottom line is that women are forced to make adjustments throughout their lives to account for these gender differences so they can stay on track. At the same time, a theme we’ve seen in studies time and again is that women aren’t feeling confident when it comes to investing. A retirement confidence survey recently conducted by Janus Henderson found that women reported greater concern about the stock market than men. Even so, women tend to have the characteristics of being long-term investors and don’t make a lot of moves in their portfolios even when confronted with choppy markets, which is a great trait to have when it comes to retirement planning.3

So, what should female investors have on their financial checklists to make sure they’re on track to reach their retirement goals in 2023 and beyond?

Get organized

If we’ve learned anything since 2020, it’s that it is impossible to see what curveballs life is going to throw our way. Creating a financial records organizer that allows you to assess your entire financial picture can help alleviate stress and set the stage for the following year. So, what is a financial records organizer? Essentially, it’s any sort of filing system that is used to store copies of all important financial documents that can help families manage their affairs in the case of death, disability, series illness, or even disasters like fires and floods.

Create a budget

A budget is essential to helping female investors be in a position to afford the life they want not only now, but also during their retirement years. But first, they need to create a baseline of where they currently stand financially – essentially a balance sheet that tracks the money they’re bringing in and the money flowing out over a year’s time. A budget will also help women establish a savings benchmark for things like paying down high-interest debt and saving for retirement.

Establish an emergency fund

One very important goal that everyone should have on their financial checklist is setting aside money in an emergency fund. We suggest having six months to a year of living expenses saved in this fund. If that seems overwhelming, a good place to start is to set a goal of saving $1,000 and then building from there (you may be surprised how quickly it add up). Setting up a separate account for emergency savings also means there’s less temptation to touch that money unless absolutely necessary.

Pay down debt

It’s important to have an idea of the four main types of debt that someone might have – credit card, student loan, mortgage, and car payments – so that a plan can be put into place to pay it down. Some ideas for reducing one’s debt burden include increasing payments, consolidating and refinancing loans, signing up for auto-payments, and exploring different repayment options. It’s also important to review credit reports and credit scores because they can have an impact on the interest rate paid when taking on new debt, especially in today’s higher interest rate environment.

Save for retirement

Women should take stock of their current retirement savings and determine whether it will be enough to support them through their retirement years. Of course that’s much easier said than done because it depends entirely on their individual situation and raises multiple questions that may not have easy answers. For example, what sort of lifestyle do they want to have during retirement? Where will they live? Will they have a part-time job? Are there any current or potential health issues they need to consider? It may not even be possible to know the answers to these questions yet, and that’s okay. Still, having a general idea now can help set the stage for a more comfortable retirement later.

For starters, women should contribute the maximum amount to their employer-sponsored retirement plan to get the full employer match, if their company offers one. Another way to help bridge the retirement savings gap is for female investors to think about increasing their retirement plan deferral rate. Even small increases can be impactful over time.

In 2023, the 401(k)-contribution limit is $22,500, and savers over age 50 can contribute an additional $7,500 – an increase of $1,000 compared to 2022. For those invested in an IRA, contribution limits for 2023 will increase by $500. And as a reminder, IRA contributions for 2022 can be made up until April 15, 2023, with a contribution limit of $6,000 ($7,000 for those age 50 and older). These are all important opportunities for female investors to bolster their long-term retirement savings.

Prepare for future healthcare needs

One of the biggest – yet often forgotten – expenses during retirement is healthcare, so this needs to be part of the retirement planning process. According to a study by Fidelity Investments, the average retired couple in 2022 may need $315,000 to cover healthcare expenses in retirement.4 There are steps that can be taken today to help mitigate the burden of these costs during retirement.

One such step is contributing to a Health Savings Account (HSA) if your company offers an HSA-eligible health plan. HSAs provide a way to set aside pre-tax money for qualified healthcare expenses that might occur in retirement, such as copays, deductibles, and coinsurance, among others. As long as HSA withdrawals are used to cover qualified healthcare expenses in retirement, they will be tax- and penalty-free.

When it comes to retirement preparedness, women have faced an uphill battle for far too long. And while we can hope for progress on that front in the years ahead, the reality is that we will need to find ways to stay on track to our goals despite the extra challenges we face. A financial checklist won’t close the retirement gap completely, but it can be a valuable tool to help bridge that gap so we can reach what we’re striving for.

1 “Still Shortchanged: An Update on Women’s Retirement Preparedness.” National Institute on Retirement Security, May 2020.
2 “Women and Retirement Savings.” Department of Labor, 2017.
3 Janus Henderson 2022 Retirement Confidence Report. November 2022.
4 “How to plan for rising health care costs.” Fidelity Investments, August 2022.

IMPORTANT INFORMATION

The information contained herein is for educational purposes only and should not be construed as financial, legal or tax advice. Circumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a financial professional. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information provided. Janus Henderson does not have information related to and does not review or verify particular financial or tax situations, and is not liable for use of, or any position taken in reliance on, such information

Janus Henderson Group plc © C-1222-46590 12-15-23