How To Be More Financially Savvy

You cannot get to age 50 without thinking about retirement. Not just when, but are you prepared? How much money do you need? As the women of our generation enter midlife, we are controlling more wealth and power. Are we ready?

McKinsey & Co. calls women the “new face of wealth.” It is estimated women control around 51% of personal wealth today, a number expected to grow significantly. According to a study by the Bank of Montreal, this is due in part to women now filling 52 percent of management, professional, and related positions and women being the primary breadwinners in 40 percent of U.S. households. Further demographic shifts will also contribute to the transfer of wealth into the hands of women as women in the U.S. outlive men by 5 years and generally marry men 2 years older.

In today’s issue I chat with Beth Wraga, Managing Director and Financial Advisor at Ratio Wealth Group, who has thirty years of financial markets experience. Below she shares insights and practical steps one can take to be more financially savvy. I love her perspective as she is also a Certified Life Coach and brings this perspective to her work.

Karyn: Why is it important for women to be talking about money and finances in midlife?

Beth: As we enter middle age, we tend to take inventory of all aspects of our life, but we are often more willing to examine and do something about our physical health.  We may have heard we need to get a colonoscopy after we turn 50 but are resistant to take the steps necessary to examine our financial well-being. 

Because of deeply rooted cultural misconceptions about women and money, females tend to be particularly hesitant.  From a young age, girls are taught to be “cautious” and “fiscally responsible”, and boys are taught to be “smart” and “build wealth”.  Women are taught to avoid financial conversations because money is “too personal”, could make someone feel bad, or simply crosses a societal boundary.

This keeps women in the dark about their finances and unwilling to plan.  It is imperative that women get involved because they are quite likely to be solely responsible for financial decisions at some point if for no other reason than the life expectancy for women is longer than men. 

For both men and women, thinking about retirement can be bittersweet. Making contingency plans around aging, potential illness and mortality can feel uncomfortable. 

Karyn: What is the most common question you get from clients in their 50’s? 

Beth: Regardless of their net worth, clients want to know if they have saved enough for retirement or their second act. They want to know what they need to do to be secure and thrive. The great news is that 50 is young! With more people living to 100 years old, 50 should be viewed as the middle decade. 

I encourage people to reimagine their 50’s as the financial fulcrum of their life: a pivot point that can help you leverage your future.  If you are proactive and optimistic, time is on your side.

Karyn: What should a person over 50 do first?

Beth: Be honest about the last time you took a good assessment of your financial health. Take time to identify your core values – clarifying the principles you prioritize above all others will help make the decision and planning process easier. Contemplate what you want to accomplish in your remaining years and what living your best life means. This means something different for everyone but how you invest your money, time, and resources are a direct expression of what you value.

Karyn: Why would someone need to work with a professional financial advisor? 

Beth: Just like working with a trainer to get physically strong and or a doctor to assess your health, a financial advisor will ask the right questions to get you on track to achieve your goals. 

You want someone who can be objective about your current situation, your values, and your needs. The financial world and changing tax codes are complex, and it is paramount to work with someone who can make sure you have an updated financial plan, shine a light on your actual expenses, and walk you through your retirement or “next chapter” options. 

A professional will help you get your financial junk drawer organized and look holistically at everything you own and owe. In addition, a good financial advisor can help you develop a healthy, positive money mindset and turn the money subject from a source of stress into a source of strength.

Karyn: What are some steps someone can take to get started on developing a plan?

Beth: I would recommend people start by:

Working with a professional to get a financial plan. This will reduce your stress about money, support your current needs, and help you achieve your goals.  A financial plan is just a roadmap; it is not set in stone but will help give you guidelines about what is possible.

Make sure your will, health care directive, and durable power of attorney are up to date.

Check and update the titles and beneficiaries on all accounts.

Maximize tax advantaged retirement savings. Once you turn 50, you can add an additional $1,000 a year to your IRA ($7000 total) and an additional $6,500 per year to your 401(k) ($27,000 total). The extra contributions can make a huge difference to your retirement savings.

Use a health savings account (HSA) as a retirement savings tool or as a stealth healthcare IRA. The money grows tax free, and some HSA plans will allow you to choose where your funds are invested.  HSA funds aren’t “use it or lose it”; the money rolls over year after year, so you can spend it now or in the future to pay for qualified health expenses—also tax free. In 2022, you can contribute pre-tax up to a maximum of $3,650 for self-only and $7,300 for families. The annual “catch-up” contribution amount for individuals aged 55 or older is an additional $1,000.

Consider long term care insurance, especially if you are still in good health. As part of the sandwich generation, our aging parents are a reminder that we need to think about how to cover potential eldercare costs like a nursing home or a home health aide. 

Karyn: For people with kids, what are common concerns?

Beth: Balancing commitments. People want to know how to create a plan which allows them to live well at the same time high school and college expenses seem to be draining savings. And everyone wants to know how to teach their kids to be smart with their money, especially in an environment of rising inflation and changing value of investments.

Karyn: How have the current markets and the pandemic changed, if at all, what people in midlife need to be thinking about?

Beth: The recent volatility in the financial markets has been a wakeup call for a lot of people. It has highlighted why having a solid financial plan in place is so important to weather periods of shock in the markets.

In addition, the pandemic may have given all of us more freedom with our work location, but it was also a reminder that life is short. And I think this recognition has caused some lifestyle inflation as people want to live well while they are healthy. To support these lifestyle changes requires financial planning to avoid unpleasant surprises.

Parting Thought

Beth’s parting thought, “I believe that taking a holistic approach to your financial well-being paves the way to a life rich in success, happiness and meaning.  With a commitment to trust and integrity, my mission is to help my clients navigate any financial challenge as well as create security.  My background working with financial institutions combined with my empathy and desire to serve others give me an ideal foundation to aid individuals and families to plan and achieve their life goals.”

Beth is a Managing Director and Financial Advisor at Ratio Wealth Group. She has thirty years of financial markets experience.  Beth is also a Certified Life Coach and helps clients identify core motivations, values, and goals as part of the wealth management discussion.  Beth lives in San Francisco with her husband and three sons.  You can connect with Beth at beth@ratiowealthgroup.com.

To be continued…