How much money do you think you’ll need for retirement? Go ahead, visualize a figure. Now I’m going to throw you a curveball: if you’re a woman, you’ll need more than if you were a man. I know, this seems unfair. To give you a clear picture of the reasons why, I sat down for a podcast interview with David Bach, the author of Smart Women Finish Rich. David’s book has sold over a million copies and just had its 63rd printing, so suffice to say he’s somewhat an expert on the topic of women and money! David recently provided an updated edition for the book’s 20th Anniversary, so we had a great discussion surrounding the original reason for the book as well as what’s changed for women over the last 20 years.
In our interview, David shared some really powerful statistics. $39.6 trillion of the world’s wealth is now controlled by women. By 2020, that figure is expected to grow to $72 trillion. Women are playing a bigger role in the financial world every year. However, on average, women have accumulated 34% less in retirement accounts than men. Why is this? David explained that women are usually much less involved in the finances and overall retirement planning process than their husbands. If that’s true for you, David had an important message that you need to hear: “It’s neither safe nor practical to assume that the man in your life can be counted on to take care of your finances.” That’s a powerful statement, and the reason for it is this: 80% of men die married, while 80% of women die widowed. Your husband might be the one making the financial decisions now, but you’ll be the one living with those decisions (and whatever finances are left) once he’s gone.
This leads into David’s original reason for the book. His own grandmother (who was poor at age 30 and became a self-made millionaire) taught him how to invest starting at age 7 with McDonald’s stock. Fast forward to David working in his father’s financial advisory business, which is where he learned that his grandma’s situation of being in charge of the money and investments was not the norm. David saw firsthand that widows who came in needed to be taught the basics of their financial plan and even how to write checks. Inspired by his grandmother, David knew he had to do something more to help, so he taught classes specifically for his female clients. Whether they were single or married, David’s goal was to teach them about their finances. After the very first seminar, he was asked for a book recommendation that would cover women and money, and there simply wasn’t one. Three years into teaching the class, people were pushing David to write the missing book, and the rest is history. The book’s mission was to teach women to be smart about money in order to protect themselves and their families, as well as teach their kids about money like his own grandmother had done.
So what’s changed over the last 20 years? A few things! For one, the average age of widowhood used to be 56 and now it’s 59. A woman’s retirement could be 10-20 years longer than the man in their life, and they have to prepare for that. Women need to be setting aside more money than their husbands (think 20% more!) because they’ll be retired longer. And if the husband gets sick or needs additional care, that will eat up a lot of retirement savings. Another change is that the divorce rate among couples over the age of 50 has increased dramatically, to the tune of 109% higher than it was 20 years ago. People were simply not getting divorced in their 50s back then, and it’s because they weren’t expecting to live to 80 or beyond. Sadly, with life expectancy increasing, folks in their 50s and 60s are deciding that they don’t want to be married to their spouse for another 20 years
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These two changes, divorce and living longer, are usually financially devastating to women. Here’s why: when it comes to divorce, the pie (money and assets) gets divided. That’s often the first thing that’s fought over in court. If you don’t know how big the pie is, you won’t get half. Ideally, we’d hope for couples to stay together, but realistically, women have to be in the know about the finances. And it’s not just in case of divorce. If you become widowed, you’ll need to know everything about your money. Where is the will, the insurance, your 401(k) plans and IRA accounts – and what are they earning? It’s absolutely imperative to know this before going through a divorce or losing your spouse. Even if you hire a financial advisor, you yourself need to know what’s going on. If you’re married and you’re not involved with the finances or not having regular financial conversations, this is something to change now. So how do you bring that up with your spouse? How do you initiate that conversation? David suggested simply saying that you want to be on the same page, and he added that you can blame it on him! Tell your spouse that you read the book or listened to the podcast and you want to know what’s going on with the finances. And ask yourself – what would you need to know about money tomorrow if your partner or spouse died? Make a list of all your questions and there’s where you start.
We’ll highlight a few more topics from this interview in another post, including what women do better than men with finances. In the meantime, head over to https://retirewithpurpose.com/podcast/david-bach-smart-women-finish-rich/ to listen to the full podcast. We’d love to hear your thoughts on this interview with David and the topic of women and money in the comments below!