In 2023, women are their own bosses. They’re moving up the corporate ladder, owning their own businesses and running households. Women are in charge, making financial decisions with confidence and finesse. Single or married, they aren’t deferring to a partner when it comes to paying their bills, investing their money and saving for retirement. A large majority (80%) of women polled for a new Alliance for Lifetime Income and HerMoney survey said they prefer to take the lead in family finances.
So, with shaky economic times looming, how can household CFOs stay on track? For starters, panicking isn’t an option. Staying the course is. Here’s how to do it amid so much uncertainty.
KEEP EMOTIONS AT BAY
The current market is tough, with volatility high and a potential recession coming. In times like these, people tend to panic and make emotional moves when the better choice is to sit tight and ride it out. Making tweaks and changes may be warranted, but any adjustments should come from understanding your investment plan, not from a place of fear.
“How you react should begin with evaluating your portfolio based on how many years away from retirement you are, and when you plan to tap into your savings. Also, just as importantly, it also depends on your risk tolerance,” says Jean Statler, CEO of the Alliance for Lifetime Income.
CONSIDER YOUR TIME HORIZON
Knowing your time horizon is important during volatile times. For example, if you have twenty plus years until retirement and your portfolio is down (but aligned properly), you can leave it alone. Now’s the time to look for opportunities to buy stocks on the cheap — not sell them off in droves.
If your portfolio is overweight in one area, and perhaps short in another, consider rebalancing. That may mean moving more money into bonds or rotating out of an industry that’s been negatively impacted by rising interest rates. Your investments should align with your long-term financial plan.
For people closer to retirement, looking at your 401(k) or IRA could cause immediate panic. After all, the average 401(k) balance is down 23% from a year ago, according to Fidelity Investments, the number one 401(k) plan provider in the U.S. A drop of that size may impact how much you ultimately have in retirement. In this case, it’s important to know how much money you’ll need to cover your essential monthly expenses, and then get enough protected income (or money you’re guaranteed to receive), to cover those costs. This is something a majority of women in The Alliance for Lifetime Income and HerMoney survey already understand the importance of — eighty-three percent of working women said they’d choose a portfolio with reliable retirement income over a risky portfolio with potential for higher returns.
“There are only three sources of protected income available today – Social Security, pensions (if you’re one of the very few fortunate ones to have one), and annuities,” says Statler. Annuities are long-term contracts with insurance companies in which you invest your money and in return get guaranteed income paid out at regular intervals. With an annuity, you never have to worry about where your money is coming from, whether or not you’ll have enough of it, or if you might outlive your money. Think of it like a pension — it’s one of the few retirement products that provides guaranteed income irregardless of the stock market’s performance or what’s going on in the economy. And a big bonus: an annuity reduces the amount the owner has to draw down from the rest of their portfolios, which can give you time to recoup any stock market losses.
Navigating investments during a volatile time can be complicated and confusing, which is why you may want to consider seeking help from a financial professional. A good one can help you fine-tune your portfolio for the current environment and help you keep fear and panic at bay. Seeking help and asking questions is something women are no longer afraid of doing. (Long gone are the days when money talks were left up to men, thank goodness!) “One positive sign in our research is that today, women aren’t shy about asking for help in planning their finances, with women twice as likely as men to say they would like to work with a financial advisor,” says Statler.
PEACE OF MIND
At the end of the day, women overwhelmingly want peace of mind. They want to sleep well at night knowing their money is working for them even when inflation is high and the markets are tanking. That’s where annuities, combined with Social Security income, comes in. They can be used to cover your basic monthly expenses in retirement, things like a mortgage or rent, utilities, food, and transportation. With those expenses covered you can use your retirement savings to pursue a hobby, travel, learn a new skill or whatever brings you joy.
“Knowing your essentials are covered provides that peace of mind retirees yearn for in retirement,” says Statler. “At the end of the day, the antidote to uncertainty is certainty, and annuities provide certainty.”
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