By Marianne Martini Nolte, CFP® 

Women can face many financial obstacles over their lifetimes; such as, pay disparity, longer average life expectancy, and staying home to raise children during what may be considered peak earning years.  These factors may lead to financial insecurity in retirement.   

Earnings

During their working years it is often recognized women receive less pay than their male counterparts.  According to the National Committee on Pay Equity, March 31, 2020 symbolized the recent Equal Pay Day (US Census Bureau, 2020).  Essentially this is when, “a woman starting work on January 1 last year would have finally earned on March 31 what a man earned during just that year” (Sonam Sheth, 2020).  

Less pay during working years equates to less benefit from Social Security in retirement.  Social Security benefits are based on a persons lifetime earnings.  Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.  A formula is applied to your average indexed earnings, resulting in your basic benefit called your “Primary Insurance Amount” or PIA which is what you can expect to receive at full retirement age (ssa.gov).  

Life Expectancy

Later in life, women often outlive their spouses and are  faced with the dreaded Required Minimum Distribution widows trap.  What is the negative impact or cause of a widows trap for a surviving spouse?  While both spouses are alive and filing their taxes as married filing joint, they generate a larger standard deduction, $24,800 in 2020. However, many surviving spouses inherit their partners Individual Retirement Account (IRA) or other retirement accounts.  The SECURE Act has increased the IRA required minimum distribution (RMD) age from 70.5 up to 72, but now a widow (or widower) will be faced with RMD’s from both their own IRA as well as their inherited IRA.  They begin receiving too much income from these distributions, but now they must file their taxes as single and receive a smaller standard deduction, $12,400 in 2020.  This may result in additional tax concerns. 

Women vs. Men

Child rearing, divorce, health scares can also effect  financial planning, but these factors are not unique only to women. Many changes have occurred in society which have altered traditional family roles.  Men may be adversely impacted too.

Conclusion

With careful consideration, both women and men may be able to mitigate financial planning issues. I feel very strongly about educating folks to make sure they feel confident about their money matters.

References

Sonam Sheth, S. G. (2020, March 31). 7 charts that show the glaring gap between men’s and women’s salaries in the US. Retrieved from https://www.businessinsider.com/gender-wage-pay-gap-charts-2017-3

US Census Bureau. (2020, March 6). Equal Pay Day: March 31, 2020. Retrieved from https://www.census.gov/newsroom/stories/2020/equal-pay.html

Your Retirement Benefit: How It’s Figured. (n.d.). Retrieved May 26, 2020, from https://www.ssa.gov/pubs/EN-05-10070.pdf

DISCLAIMER The opinions expressed in this newsletter (article) are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to accuracy or completeness. 

Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation (PSEC), a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Ave, Carpinteria, CA. 93013, (800) 874-6910. Imagine Financial Services and PlanMember Securities Corporation are independently owned and operated companies. PlanMember is not responsible or liable for ancillary products or services offered by Imagine Financial Services or this representative. Marianne Martini Nolte, CA Insurance Lic #0J02045.