Women approaching their 50s often find themselves at a crucial stage in their financial journey. With retirement on the horizon and other life changes potentially unfolding, taking proactive steps to secure a stable financial future becomes increasingly important. This week’s blog explores 20 essential financial tips for women over 50. The goal: help them navigate this stage with confidence and make more informed decisions.
Financial Tips for Women Over 50:
1. Assess Your Current Financial Situation:
Securing your future starts with having a basic understanding of your financial situation. That’s why the first of our financial tips for women over 50 suggests taking a close look at your finances. Evaluate your savings, investments, debts, retirement accounts, and other financial assets. Plus, you should understand any income streams you expect to receive in retirement. Gaining a clear understanding of your financial position will help you set realistic goals and devise a solid financial plan.
2. Plan for Retirement:
Retirement planning is critical at this stage. Even better, elevate your planning and work on your life plan. We believe life planning is financial planning done right. Retirement calculators can help you estimate how much you’ll need during your retirement years. In addition, you can consider consulting a financial advisor to create a comprehensive retirement plan that aligns with your lifestyle goals. If you would like to work with us on your life plan, please schedule a free call.
3. Determine What Matters Most to You:
The sooner you determine what matters most to you the better. That’s why the next of our financial tips for women over 50 suggests that you start by identifying your priorities. Your spending should reflect what is important to you both now and in the future. Life often involves choices. Wouldn’t you rather spend your money on things or experiences that you truly enjoy? Doing so can help you live your most fulfilled life – a life with meaning and purpose.
4. Maximize Retirement Contributions:
Take advantage of catch-up contributions allowed by retirement accounts for individuals over 50. In 2023, you can contribute $22,500 to your 401(k). Those who are 50 or over can contribute as much as $7,500 more. If you are eligible (see here for income limits) to contribute up to $7,500 to an IRA or Roth IRA. (Those who are 50 or over can also contribute an extra $1,000.) Contributing extra funds to your 401(k) or IRA can significantly boost your retirement savings in the final stretch.
5. If Eligible, Fund your HSA:
If you have a high deductible healthcare plan, consider funding your HSA. Individuals can contribute up to $3,850 in 2023. Family contributions are capped at $7,750. HSAs provide a triple tax-free retirement savings benefit. Ideally, you should pay for any deductibles and co-pays without using the funds in your HSA. Instead, treat your HSA as an investment account and plan to use the funds in retirement.
6. Diversify Your Investments:
As you approach retirement, the importance of your asset allocation can increase. Diversification can help reduce risks and benefit potential returns over time. Consider a mix of stocks, bonds, exchange-traded funds (ETFs), and real estate, depending on your risk tolerance and financial objectives. In general, at least a 50% allocation to stocks is recommended.
7. Avoid Risky Investments:
As you approach retirement, it’s wise to be cautious with risky investments that could jeopardize your financial security. Focus on preserving capital and generating income from your portfolio rather than pursuing aggressive growth. This does not mean you should avoid owning stocks or lowering your equity allocation too much. Even in retirement, you should maintain exposure to stocks. But some growth is still needed. Without it, your portfolio will fail to keep pace with inflation. This will lead to a loss of purchasing power. That can keep you from living your desired lifestyle both now and in retirement.
8. Diversify Your Account Types:
The next of our financial tips for women over 50 relates to a second type of diversification. Consider diversifying your account types from a tax perspective as well. When you retire, you will likely pay taxes on at least some retirement account withdrawals. Remember that the tax treatment of income from your investment accounts, IRAs/401(k)s, Roth IRAs/401(k)s, health savings accounts (HSAs), Social Security benefits, and pensions differ. Having different buckets to withdraw funds from can help you reduce the cost of withdrawals when you switch from saving to spending your retirement assets.
9. Consider a Backdoor Roth Contribution or a Roth Conversion:
If you don’t have Roth savings or are ineligible to contribute to one you can consider backdoor Roth IRA contributions or Roth conversions. While you pay taxes on the money contributed through these types of transactions, today’s rates could be less than those in the future. If you are unsure as to whether either of these would be suitable for you, please schedule a free call.
10. Prioritize Debt Reduction:
Work diligently to pay off high-interest debts like credit cards and loans. Strive to pay your credit card balance(s) in full each month. Carrying credit card debt can be very costly. After all, being debt-free in retirement can provide more financial freedom and peace of mind.
11. Consider Long-Term Care Insurance:
Long-term care insurance (LTCI) can safeguard your savings from potential healthcare expenses in the future. It’s better to plan for this possibility rather than burden your loved ones with financial responsibilities later on. Remember that the average woman lives longer than the average man. Plus, husbands are typically older than their wives. These factors make it more likely that a woman will need LTCI than her husband.
12. Update Your Estate Plan:
Ensure that your estate plan, including wills, trusts, and beneficiary designations, is up to date. This helps ensure that your assets are distributed according to your wishes. It can also minimize potential legal complications. Updating beneficiary designations takes on added importance if you get divorced. If you list your ex as a beneficiary on a financial account and don’t change it, your ex will inherit the account if you die first.
13. Review Insurance Coverage:
Evaluate your insurance policies, including health, life, and disability coverage. Make any necessary adjustments to meet your current needs and lifestyle. Depending on your circumstances, you often need less life insurance coverage as you age. For example, when you become an empty nester, you no longer need to worry about funding your children’s education.
14. Explore New Income Opportunities:
Remember that working longer can be a win-win from a financial standpoint. It can reduce portfolio withdrawals and improve portfolio longevity. It can also allow you to delay your Social Security claiming decision or enable additional retirement-plan contributions later in life. If you’re considering a phased retirement or want to keep receiving an income after retiring from your primary career, explore part-time work or consultancy opportunities. It can be both financially rewarding and personally fulfilling.
15. Educate Yourself:
Stay informed about personal finance and investment trends. Attend seminars, read books, and follow reliable financial blogs or podcasts to help you make well-informed decisions. You could also consider taking a class or a workshop on financial issues, too. If you work with a financial advisor such as Apprise that values educating their clients, ask your advisor to help you understand the “why” behind their recommendations.
16. Join Women’s Financial Groups:
Look for women’s financial empowerment groups in your community or online. Being part of such communities can provide valuable support, insights, and motivation. Joining such a group can boost your confidence and empower you to take control of your financial future. It can also help you make informed decisions and overcome any fear you may have. Such a group can provide a collective voice that can help bring attention to your concerns and drive positive change, too.
17. Communicate with Your Spouse or Partner:
We don’t talk about finances enough. Some find it easier to talk about sex than personal finances. If you have a spouse or partner, you should be on the same page regarding financial goals and retirement plans. Open communication can lead to better financial decisions and prevent misunderstandings. If you need some suggestions to get the conversation started, check this link.
18. Plan for Social Security:
Understand your Social Security benefits and strategize when to start claiming them. Delaying benefits can lead to higher payouts, so carefully consider your options. Delaying the start of benefits can be particularly beneficial if your family and personal health history points to longevity. Recognize that for married couples, the claiming decision should take both spouses into consideration. The surviving spouse – normally the wife – will receive the higher of the two benefits. You will also want to understand the taxation of Social Security benefits.
19. Consider Downsizing:
If you have an empty nest, you may want to downsize your home. This can lower your expenses. Moving into a home that requires less maintenance or where others arrange for services such as landscaping may also be desirable. Downsizing can also provide additional equity if you spend less than what you receive from selling your home on your new residence.
20. Manage Your Personal Health:
The last of our financial tips for women over 50 relates to you. Remember that your financial health is connected to your overall well-being. Prioritize self-care and maintaining a healthy lifestyle to reduce healthcare expenses in the long run. Plus, maintaining good health can help you avoid costly medical treatments in the long run. It could also lower your insurance premiums.
In conclusion, women over 50 have unique financial considerations that deserve attention. By following these financial tips for women over 50 and making informed decisions, you can secure your financial future with confidence, paving the way for a fulfilling and worry-free retirement. Remember, it’s never too late to take control of your finances and build a stable foundation for the years ahead. You can easily have more years left than you imagine. Following these steps can help make those years more enjoyable. Ultimately, following these tips can help you lead a more fulfilling life both during your working years and into retirement.
If you would like to talk to us about financial topics including your investments, creating your life plan, saving for college, or saving for retirement, please complete our contact form or schedule a call or a virtual meeting via Zoom. We will be in touch.
Next week, please look for our Tuesday Tips video blog.
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.