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Financial Planning Strategies for Women to Consider Over Five Life Phases 

Brooke Boone Kelly, CFP®, MACC Wealth Management Advisor, Partner | Andrea Taylor, CPA, MSA Wealth Management Advisor | April 11, 2024

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In our 30-year firm history and experience working with clients, every person has unique planning opportunities to explore and consider throughout their lifespan. As a female-founded and majority owned firm, women have organically become a growing client group we service. In this blog post, we outline various investment and financial planning opportunities for women to consider, broken out over five life phases, with many strategies that can apply to all individuals. 

Phase 1: Laying the Groundwork- Young Professional Phase 

Make the most of your early career to earn what you are worth, establish good money habits and harness the power of compounding returns.  

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The transition into the workforce marks a critical time for establishing financial independence. Healthy habit formation in these early years coupled with a few small strategic decisions, can have a significant long-term benefit. Some unique planning and investment opportunities to consider in this phase include: 

• Budgeting: the 50/30/20 rule serves as a basic, easy to remember tool- of your net income, budget 50% for essential living expenses/30% towards wants, or discretionary spending- such as gifts to philanthropy/ and 20% towards savings and debt repayment.  
• Pay yourself first: While you may be balancing student loans or other debt from pre-career, it is key to establish a 3–6-month emergency fund as early as possible. A separate account such as a High Yield Savings account for a portion of your paycheck to go into can be a simple solution to pay yourself first and start building your nest egg.  
• Retirement account contributions: Familiarize yourself with your employer’s retirement account options such as traditional 401Ks and Roth 401Ks. Often, employers will match contributions up to a certain percentage or dollar amount. Best practice is to at least contribute enough to get the company match. As you progress through the Young Professional Phase and debt balances are repaid, try to max out retirement plan contributions.   
• Roth IRAs and tax- deductible contributions to IRAs: Roth IRAs can also be ideal vehicles for those early in their career as they allow for tax-free growth over time and future withdrawals are typically tax free if certain criteria are met. There are some rules outlined in our Young Adult Checklist and income limitations outlined in our Keys to our Key Financial Data Chart  that can impact eligibility for Roth IRAs contributions. For those who may be ineligible for Roth IRA contributions, tax deductible IRA contributions could also be an attractive option to explore.  
• Health Savings Accounts (HSAs): For those who have a High Deductible Health Insurance Plan, a Health Savings Account (HSA) can be a way to defer pre-tax dollars to be used on various future healthcare expenses. 
• Investing Funds: Once contributions are made to employer retirement accounts, Roths, IRAs, or HSA accounts, be sure to invest the monies for potential long-term growth. In the event you save additional money beyond your emergency fund, retirement assets and HSA account, consider taxable brokerage accounts to save and invest additional monies.  

For women, this stage is also about understanding and negotiating for fair pay, reflecting their worth in the workplace, which is essential for setting a strong financial trajectory.  

Phase 2: Career Advancement- Focus Phase  

This period is crucial for establishing a strong financial foundation, assets are the key to building wealth over time, choose what you want to do and do it well.  

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The second stage, or the “Focus” stage can be an ideal time for women to pursue entrepreneurial ventures or advance as an employee. 

Women increasingly contribute to their growing economic influence- establishing successful businesses and acquiring stock options from publicly traded companies. Between 2020 and 2021, more than 49% of new businesses were started by women, up from 28% in 2019.  

Some different opportunities for women in the Focus stage to consider, include:

• Mentorship: Regardless of the path, business is about people and connections. Seek out other women mentors on a similar career trajectory or on a path that you admire. Learn to establish connections and ask for advice.  
• Entrepreneurs/Self Employed/Business Owners: For women who are self-employed or small business owners, decision making is limitless. We prioritize three key components to start on an entrepreneurial journey- business plans, business structure, and retirement accounts.   
  • Business Plan: an effective business plan can serve as a business roadmap and help with initial business funding. It can evolve overtime and drive your strategic planning, business growth, help manage finances, and strategize business exit or succession planning effectively.  
  • Business Structure: Sole-Proprietorships, Partnerships, S and C Corporations, and Limited Liability Companies (LLC) each have their own distinct tax implications, personal liability considerations, and operational complexities that we touch on in depth in the following blog post: From Start Up to Success: A Business Owners Journey  
  • Retirement Accounts: It is important to maximize after-tax income via retirement account. Some retirement plan vehicles to consider are Solo 401k, SIMPLE IRA, SEP IRA, Profit Sharing, or Defined Benefit Plans.  

• Working Women: For women who work for small businesses, large corporations, or anything in between- education and understanding is key.  Take the time to understand your entire employee compensation package as there is often more value than your base salary. This can include your base income, employer portion retirement contributions, healthcare benefits and employer paid premiums, bonus compensation, time off policies, life insurance policies and stock options. If you are granted stock options as a part of your compensation, there can be some complexities and unique tax implications, so it is important to consult with financial professionals for personalized advice.  

Phase 3: Peak Earning Years and Asset Accumulation Phase 

There is no one size fits all approach- focus on communication, clarity, and stability. 

Often, women in this phase are in their peak earning years while balancing several responsibilities, from personal to partnering or parenting, while accumulating assets and managing finances. As women navigate this phase, it is important to think about your personal, financial and career goals with intention.

Some strategies we like to leverage are broken out here- 

• Create an asset list: Create a list of your assets, which includes where they are held or custodied, the dollar amounts, title of each account, nature of the asset- community property or separate property, and key professionals to contact. In two party households, it is imperative for both partners to be engaged in financial decisions and knowledge transfer. This exercise not only helps educate both parties but can also serve as a resource in the event of an unexpected death or divorce. For two party or solo households, it can also be a starting point for planning opportunities, risk tolerance evaluation, and short- and long-term financial goals. 
• Create an estate plan: Typically, all adults in this phase should have four basic estate planning documents: a trust, a will, power of attorney for healthcare, and power of attorney for finance. The asset list can be used to evaluate the need for community property trusts versus separate property trusts and which assets need to be retitled. It also creates the opportunity for self-employed women to create a personalized estate plan that intertwines with their business plan.  
• Planning for Young Families: For women who have or plan to have families, there are some important steps to consider that we outline in our “Planning for Young Families” blog post.  

• For women or a partner who decides to no longer work or stay at home, a Spousal IRA  can also allow for maximized asset accumulation and growth.  

Phase 4: Preparing for Retirement Phase  

Make the most of your accumulated wealth and life experience to invest with confidence and purpose. 

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Approaching retirement, the focus shifts to maximizing employer benefits and solidifying income sources for a comfortable life post-career. 

• Maximize Employer Benefits: Pre-departure from your employer, confirm which benefits may continue or may be portable to you. Some key considerations:  
  • Healthcare Insurance: Confirm if your healthcare insurance will continue or if you are eligible for COBRA. This is especially key if you are pre-Medicare age or rely on your current employer’s healthcare insurance coverage. 
  • Life Insurance: some employer sponsored life insurance plans may be portable meaning, you take over the policy and pay the premiums out of your own pocket. This may be an attractive opportunity to continue coverage versus securing a new life insurance policy.  
  • Stock Options or Equity Ownership: confirm if all shares- vested and nonvested- will remain intact or if any shares/ownership will be forfeited. 
  • Employer Retirement Plans and Pensions: some employer plans allow assets to be held within the employer, while others may require the assets rollover to an IRA, or others may allow you to choose. Additionally, pension plans typically have a wide range of pension income payout options- such as single life, joint survivor 100%, 25% or 50%- or lump sum. Evaluating the different options is key to maximizing retirement income, flexibility, and potential future investment growth.  

• Roadmap to Retirement: Given women tend to our live men, it is prudent to understand the ins and outs of Social Security, Medicare, and other retirement income sources becomes crucial; benefit optimization is key. Drawing from your different buckets of assets, in tax efficient ways, can also help maximize assets and help address longevity. Our Roadmap to Retirement Blog  highlight several of these considerations in greater detail. 

Phase 5: Successful Wealth Transfer Phase 

Balance any desire to leave a legacy with a realistic plan for converting your savings into income, make your intentions clear and organize your assets.   

By the end of this decade, a 2020 study found, women are set to control much of the $30 trillion in financial assets that Baby Boomer’s currently possess.  Whether due to asset accumulation in working years, inheritance due to death or divorce, or longevity- women are gaining more economic power than previous generations. These circumstances coupled with women longevity, necessitates careful guidance from your team of professionals to ensure proper estate administration in the event of death or divorce.  

• Planning for Successful Wealth Transfers: It is also key to revisit and keep estate plans and IRA beneficiaries up to date. A key question worth asking is what legacy do I want to leave behind for my family and/or to philanthropy? From there, there are some different strategies to consider such as annual tax-exempt gifting to individuals ($18K/person in 2024), and Donor Advised Funds (DAFs) and Qualified Charitable Distributions (QCDs) for tax efficient philanthropic giving. 

Conclusion  

In recent years, an unmistakable shift in the landscape of wealth accumulation and transfer has occurred, with women emerging as key drivers and beneficiaries. Weatherly stands at the intersection of these life stages, offering tailored advice, educational resources, and a supportive community to navigate the financial nuances each phase presents. 

If this guide resonates with you or reminds you of someone in your life who could benefit from our services, we invite you to reach out. Together, we can build a financial plan that not only meets but anticipates your needs through every phase of life, ensuring a future of independence, security, and peace of mind.  

** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.