Less than 50 years ago the Equal Credit Opportunity Act was passed in the U.S., granting single, widowed or divorced women access to credit without needing a male co-signer. Today, women are the lead household decision makers for healthcare, finances and overall planning for the future. As we approach National Women’s History month in March and celebrate all that women have achieved, we caught up with Rachel Barzilay, CAP®, CFP®, CRPC®, Managing Director, Wealth Management Advisor and Senior Portfolio Manager with Merrill Lynch Wealth Management in Boca Raton, to learn more about the special considerations women should take when it comes to their finances.
What is a Trusteed IRA and how can it help?
A trusteed IRA is similar to a “regular” IRA except that the account assets are held in a trust rather than a “custodial account.” The IRA provider (financial institution that administers the IRA) serves as the trustee of the account, rather than as a “custodian.” The trusteed IRA can offer greater protection during the owner’s life (including an instance in which the owner becomes disabled) and increased control over the disposition of the IRA after the owner’s death. This could be of interest to women with children who would inherit the account, especially in the event of a second marriage (and a mother wants to ensure protection over her pre-marital assets).
What should new parents know?
Most new parents realize that raising a child is expensive — the latest government figures put the cost at $233,610 for the first 18 years alone, not including college tuition or taking inflation into account. These figures only include the necessities: food, clothing, health care and housing. Budgeting is key to managing this major life change, which I can attest to as a new mom.
To ensure a fully secure financial future for your child, be sure to appoint a guardian/executor and solidify a will. This is especially critical for parents of minor children, because it also allows you to name the person you trust to take care of your child in the event both you and your spouse are unable. Additionally, don’t postpone college planning. The earlier you can start saving, the better!
How do we avoid being a procrastinator when it comes to retirement?
Women juggle multiple roles throughout their lifetime, which means we often overlook our own financial security for retirement. Retirement may seem unattainable, but don’t be discouraged. Even saving small amounts periodically will add up over the years. By taking action now to start saving, you’ll be better prepared to meet any unexpected challenges that come your way. Another option to consider is downsizing or moving somewhere less expensive to cut down your cost of living. You could also fully contribute to tax-advantageous accounts such as your 401K, IRA, and a health savings account. Finally, it is always best to pay off costly debts, such as high-interest credit cards, as soon as possible and then contributing any excess funds after paying necessary bills to your retirement.
Compared to a generation ago, women today play an important role in their households, with some even holding higher degrees and earning more income than their spouses. Thus, it is important to understand and proactively monitor household finances for your benefit and for the benefit of your family.