Being a woman entrepreneur surrounded by the other women business owners on Nassau Street in downtown Princeton, I cheer the creativity, daring, and caring they show in establishing and running their businesses. For women, money is only one of the goals. A double or triple bottom line that encompasses connecting with people, providing for the family, and contributing to the community is often the norm.
The question of whether women are good at investing is often put to me whether directly or indirectly. Of course, they are! In some cultures, women are actively involved in making the household financial and investment decisions, resulting in more savings and more prudent financial decisions. Women’s involvement adds cognitive diversity to financial decision making and can lead to better results — whether at home or on Wall Street.
It is striking how little women as a group have saved for retirement in America. The national median retirement savings for women is about a third, or just $23,000, of what men had. Some causes of the disparities are apparent. One reason is that women have fewer active working years due to caring for children and other family members. Another is that they just earn less for the same jobs. Evidence shows a third reason: few women have even heard about the Spousal IRA for nonworking spouses, or the SEP IRA or solo 401(k) for small business owners. This is a problem we can solve now … just read on.
Take advantage of the options and benefits for retirement savings. It is estimated a $6,000 annual Spousal IRA contribution over 30 years at a 6 percent rate of return can add up to a half million dollars at retirement. A woman doesn’t have to be an investment guru to set up one of these accounts. Jointly filing couples can save on the family tax bill by contributing to a Spousal IRA for a non-working spouse. The contribution is deducted from the current year’s taxable income. You don’t pay income tax on it until you use it in retirement, and then you will likely be in a lower tax bracket. The SEP IRA or solo 401(k) for business owners allow them to access even greater tax deferrals.
The sooner you start the better and there is still time to make a 2019 contribution to a retirement plan until the tax filing deadline on April 15.
I established Songbird Capital in 2012 after retiring from Citigroup, where I spent a decade helping institutions manage their hedge fund allocations. Many clients of Songbird Capital are women. I enjoy working with them because we share many of the same challenges and experiences.
Songbird Capital, 14 Nassau Street, Princeton. 609-924-5300. 609-462-0095. www.songbird-capital.com.