Money Matters: Helping mothers with their finances

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This Mother’s Day, help Mom take control of her finances with financial expert Barry Bigelow’s tips to help mom’s manage their money.

Moms are especially at a disadvantage financially due to the fact that there is still a gender pay gap, and women earn 83 cents for every dollar men earn. That’s like women working a typical 9-5 day, but they work for free starting at 3:40 p.m. During the pandemic, women lost jobs at a higher rate than men. To add insult to injury, women haven’t recovered those jobs either! There are several reasons for the substantial job losses. Women are the primary caretakers of children, their aging parents and relatives. Women are also more likely to work in social sectors like retail, hospitality and tourism, all of which were hit hard when the pandemic began.

It is even more difficult for single moms to prioritize their financial future. The median income for families led by a single mother in 2020 was about $49,214, well below the $101,517 median for married couples. With that kind of financial disparity, you have to take control of your money. Barry recommends organizing your lifestyle around saving for the future instead of building a lifestyle and hoping to save for the future.

Moms can maximize their money in a few ways. The first way is to strategically save. A recent study found that if 100% of the lost earnings due to the wage gap were invested over a 40-year career, women working full-time, year-round could save nearly $1.6 million for retirement. If you are currently employed and have an employer-sponsored retirement plan available to you, I recommend dedicating at least 5-10% of each paycheck to your 401(k). If you’re taking a career break to raise your family or care for aging parents, make sure you don’t leave 401(k) stranded or invested in a fund that has low returns and/or fees. If you don’t work outside the home, you can open an IRA as long as you and your spouse file a joint tax return. You can contribute up to $6,000 to an IRA this year. If you’re 50 or older, the contribution limit goes up to $7,000.

Another way moms can maximize their money is by preparing for long-term care. Women statistically live longer than men. It’s important to have a plan that will outlast you. Long-term care insurance helps cover the costs of nursing home care and home-health care later in life. It can also help families pay for the care needed for chronic medical conditions, like Alzheimer’s or dementia. While some employers offer long-term care insurance as part of their benefits package, most people buy it through an insurance agent or financial professional. Investigate your options and decide whether a traditional or hybrid policy makes sense. Traditional long-term care insurance policies typically come with annual premiums for life, while hybrid policies may allow you to draw down or accelerate the death benefit amount. Another option is a long-term care annuity.

The last tip is to plan for taxes. Many people forget that if their spouse passes away, they only have one more tax year to file their taxes jointly. The following year the surviving spouse will need to file as a single filer. This could cost you money if not done correctly. A comprehensive financial plan should include strategies to minimize your tax liability. At Great Waters Financial, we take all the components and make sure the plan works in your best interest. If you want to learn more about our planning process, follow us on Facebook and LinkedIn.