Women face greater obstacles than men do in building their financial nest egg and securing their financial future. On average, women live longer, spend more time out of the work force to raise families and tend to earn less. Despite the initial strikes against them, however, women are overcoming these financial obstacles. Women are starting new businesses at twice the rate of men and are earning more than ever before. Women are becoming more financially savvy about debt, taxes and investing, but they still fall short on retirement planning.

Retirement
Although women have made many impressive strides toward financial independence, they report having just over half as much for retirement as men ($72,000 for women vs. $123,000 for men).¹ The most important factor in retirement planning for women is often the decision to leave the work force to raise a family. During those years, no money is going into Social Security, pension plans or 401(k) plans.

Women should start saving for retirement as early and as aggressively as possible. Overall, because women live longer than men, it is recommended they save 12% of their gross income rather than just 10%. If you're married and at home caring for children, encourage your husband to contribute the maximum amount to his 401(k). It is a good idea to invest the maximum allowed in an IRA for yourself.

Taxes
With more female business owners and more single women buying homes and qualifying for mortgage interest and property tax deductions, tax planning is becoming an integral part of women's financial lives.

The first step in tax planning is to make sure you are taking advantage of the tax vehicles available to you. Be sure you are contributing the maximum amount to your 401(k) and/or IRA. Then make sure you are maximizing your tax deductions. Some deductions that are often overlooked include student loan interest, childcare costs, business expenses that were not reimbursed and expenses related to owning or buying a home, such as mortgage interest and closing costs. Finally, be proactive about tax planning. Meet with a financial advisor or tax professional early in the year to discuss tax-saving strategies for the next tax year.

Investing
How can you start an investment portfolio? First familiarize yourself with investing basics. Take an introductory course at a local community college or go online. Begin making less complicated investments such as putting money into a retirement account. Also, contact a qualified financial advisor who can answer questions and offer advice on investment strategies you may not have considered.

Debt and Credit Cards
Debt is a serious financial issue for men and women. To get yourself out of debt, you must first understand your spending. Calculate your expenses and cut back on unnecessary purchases. The goal is to reduce your spending so you won't add to your debt and to free up as much cash as possible to cut down existing debt. Once you've done that, begin attacking your existing debt by paying off high-rate credit cards first and transferring high-rate debt to lower-rate cards. Most importantly, do not incur any additional debt unless it is used to finance things that will increase in value, such as a home, education or big-ticket necessities like a computer.

¹ "Top Facts about Women-Owned Businesses," Center for Women's Business Research, 2006
¹ cbsnews.com, "How Women Can Boost Their Savings," 2006

Ameriprise Financial Services, Inc. Member FINRA and SIPC.

Neither Ameriprise Financial nor its affiliates or representatives may provide tax or legal advice. Consult your tax advisor or attorney about how specific issues may impact you.

top

*The initial consultation provides an overview of financial concepts. You will not receive written analysis and/or recommendations.

This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation.