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Women and Wealth: Top 5 Considerations for Year-End Financial Planning

Lauren Rosberg, CFP®, CRPC®, CDFA®, AEP®

Wealth Advisor

Summary

Read on for our top 5 financial wellness considerations heading into 2024.

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For many, the end of the year is a time for reflection and setting goals for the next 12 months. Last year, I took my daughters to our local mall a few days before New Year’s Eve so they could spend their Claire’s gift cards from Santa. The mall’s holiday display featured a Christmas tree, menorah, and table stocked with pens and Post-it® Notes to write down resolutions. The girls read the notes others had written with their hopes for the new year before penning their own. I cringed a bit as my sweet 10-year-old wrote, “Get rich!” I was hoping she would write something along the lines of being kind and helping others: she has a both huge heart and avid interest in investing. And she has a good point: focusing on financial health should be a priority for women, especially as the year comes to a close.

As a wealth advisor, I’ve compiled a list of the five top things women should consider before ringing in the new year. Read on to learn more, and best wishes for health, success, and a fruitful 2024!

 

Benchmark your income

Whether you’re a W2 employee, business owner, gig worker, or rely on investment income, inflows are extremely important — especially when inflation spikes.

W2 employees: If you are a W2 employee and you haven’t benchmarked your salary in the past three years, you need to ensure you are getting paid enough. Because the job market is still very tight in most industries and companies typically budget for salaries and new hires during the beginning of the year, a recruiter in your industry should be able to help determine if your pay is competitive. The job market is hot, given the recent explosion of work from home roles. A good recruiter negotiates salary changes on your behalf, so if you plan on staying with your current employer, ask for help negotiating higher pay. The gender pay gap is still alive and well—men typically earn more than women for the exact same roles—and one of the reasons cited is that women may be more hesitant to negotiate than men. If you need to sharpen negotiation skills, I suggest Next-Level Negotiating from the Harvard Business Review Women at Work series. The Balance also has a great article on salary negotiation for women, or refer to our article, “Women: How to Slay Your Money Dragons at Any Age” for more tips on negotiation and optimizing savings strategy based on your age.

Business owners: If you are a business owner, make sure you are charging enough for your time, product, and expertise. Your good clients will understand and may already expect a fee increase—hasn’t everything else gone up? If you are reliant on investment income, make sure you are in frequent contact with a solid financial planner.

 

Give and get: Savvy charitable giving

According to an Indiana University study, women are more inclined to donate to charity than men.1Helping others is on many of our minds this time of year, and whether one donates to charities, tithes in places of worship, or helps others through a catastrophic event, there are smart ways to be tax-efficient with your gifting.

A hot topic in financial planning is the use of a Donor-Advised Fund (DAF), which is a private fund established for gifting to charities of your choice as you see fit. It works by giving an irrevocable gift to your DAF of cash, securities, or other assets. Your charitable tax deduction happens when you provide your irrevocable gift, and assets then grow tax-free and can be distributed tax-free. You can name your DAF after yourself or your family and assign successor donor-advisors to carry out your gifting legacy after you pass. There are many other tax-advantaged ways to donate to charities. If charitable giving is important to you, discuss tax-advantaged gifting options with your wealth advisor or accountant. Check out this article written by Mark Eshman, Director of the Mercer Advisors Foundations and Endowments Group, to learn more about DAFs.

 

Review your savings and budget

The end of the year is a great time to review your saving and spending habits. Retirement plan maximum contribution limits typically increase each year. Financial planners often suggest an annual retirement savings goal between 10 to 15 percent of your total income. However, people often find themselves playing catch-up in their later years and need to be mindful that they are making the maximum retirement contribution possible.

Depending on your unique situation, funding other savings accounts such as an emergency fund or college savings accounts, such as a 529, are also important to review. Your emergency fund should comfortably cover between three to six months of living expenses. You should also be working with your wealth advisor to make sure you are adequately funding 529 college savings accounts. High-net-worth women often delay or don’t open 529 plans for their children under the pretense they can pay for college outright. The missed opportunity for compounding, tax-free growth and distribution of college funds is quite costly. If saving enough presents a challenge to your budget, comb through your monthly expenses to see how you can control costs. Many banking apps have tools to help look at your budget and see what categories of spending can be dialed back in.

 

Review your insurance

It is important for women to protect the lifestyle one works so hard to achieve with insurance. Review your life, home, car, umbrella, professional liability, health, short- and long-term disability insurance with your wealth advisor. It could just take one bad accident to send your financial plan and life into a tailspin. Women are also more likely to need long-term care in our older years. Women comprise about 70% of nursing home residents and 75% of those in assisted living facilities.2 The cost of long-term care is shockingly expensive and often not covered by Medicare. The good news: long-term care insurance has evolved in recent years and provides more flexible coverage. Also, the younger you are when you apply, the more affordable the premiums. Most wealth advisors suggest clients begin looking for a long-term care policy in their early 50s.

 

Consider caregiving solutions

Women are often default caregivers to their children and aging family members. While professional women can usually plan for the care of their children through daycare, nannies, au pairs, or grandparents, caring for aging parents can be trickier. Many women leave the workforce, reduce hours, or move home to care for their parents, resulting in lost income and retirement savings. This means that saving for retirement in the early years of one’s career will be even more important. In fact, a Goldman Sachs report found that 55% of Gen X-ers and 72% of millennials predict that they will lose earnings and career momentum due to caregiving.3 Another option is hiring an in-home caregiver. There are several organizations that can help match a family member with qualified caregivers. Mercer Advisor clients have access to Wellthy®, a concierge service to help find and manage care for loved ones. It is important to discuss wishes and plans your parents may have in place before they need care. These discussions can lead to a making a plan that honors the wishes and boundaries of all parties involved.

Are you on a good path to retirement? What solutions have you found for cutting costs within your own budget? Do you worry about your career momentum stalling due to caring for others? Have you signed up for Wellthy? Connect with your advisor to discuss today. I hope that these five considerations for your financial year-end planning are helpful as you look toward a fruitful 2024.

Mercer Advisors Inc. is a parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.

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