Financial Knowledge to Build Wealth
and Invest Wisely for Generation X Women
Financial Feminism MasterClass brought to you by BakerAvenue
Generation X (1965-1979)
Gen Xers experienced the robust stock market of the 90s, but also endured 9/11, the wars in the Middle East, and the dot.com crash. You were the hardest-hit generation by the housing bubble and 2008 recession, but now find yourself in your peak earning years, requiring an adjustment to your financial planning.
You are willing to accept more risk in order to focus on more returns, and although a self-reliant individual with a preference to manage your own assets, you may be open to financial management expertise. Seeking out a trusted advisor may be top of mind to tackle new concerns, such as juggling the care of both your children and your parents.
Meet Gen Xer Jennie, Age 50
As a single mom, it can be hard to juggle all that life is throwing at me. I often feel that while I’m getting everything done, I am not doing anything well. Household finances are no different. I am lucky to earn enough money to cover expenses, save for retirement, and have some extra. I tell myself that I am going to start putting the “extra” into an investment account, but that never makes it to the top of my “to-do list.” I’m glad I started 529 plans for the kids – and have always been diligent about saving for retirement – but I know I need to take a more sophisticated look at my finances.
Top Three Issues for My Financial Future
- Am I saving enough for retirement or should I be putting more into that bucket? I’ve had a financial plan run for me and it looked fine. But I’d like to know how much cushion I will have. Will I be able to live wherever I like, travel, and still have money to cover any unexpected medical needs? While I do have money to pay for the kids’ college expenses, I might have to eat into retirement savings if they want to go to private or out-of-state schools. Does that mean I will have to work longer? I just don’t have a clear picture around how financially set up I am for retirement.
- I am so busy – I don’t feel organized around my financial life. Early on, I created a trust and healthcare directives, but I haven’t looked at those in years. I am not exactly sure how my assets would be dispersed if something were to happen to me. I know that I will have some inheritance coming to me as well as a potential liquidity event at work. While these are both going to be very helpful for me financially, I am unsure about how to invest the money in order to really get the benefits from it.
- How will I manage taking care of my parents when they begin to need my help? They are both healthy but do not have a huge retirement savings. My dad has a lot of dementia in his family and his father lived well into his 90s. I’m concerned about where they will live and if they will have enough to be able to cover extra help as they need it. I feel like I will become an empty nester only to then have my parents to care for.
What would I do differently: I wish I had looked for someone to help me manage my money sooner. Most of my savings is in my 401(k) and I have just let it grow. Now I recognize that my life has become more complex – and I need professional guidance.
Overview of What to Consider
In Your 40s...
You may have children who are nearing college. If you haven't already, it is time to consider setting up a college fund that will grow and compound. While it may be tempting to cover those hefty college loans and assist with your children’s education, now is not the time to pull from your retirement fund. Maintaining your retirement planning efforts is crucial during this period of your life. In order to set yourself up for future financial success as you head closer towards retirement:
- Create a college fund for children / grandchildren
- Maintain retirement planning
In Your 50s...
Now is the time to start thinking about an approximate retirement date. As you do so, you’ll want to consider accelerating your retirement savings by upping your contribution levels and taking advantage of catch-up contributions. You’ll also want to prioritize reducing as much of your debt as possible as you approach your target retirement date:
- Plan an approximate retirement date
- Accelerate retirement savings
- Reduce your debts
Did you know that over a lifetime, women are losing upwards of $100 a day by not investing? And that women are 80% more likely than men to be impoverished during retirement?
Regardless of what generation you are, learning how to invest is a powerful skill that can provide you with an edge.
Recommended Portfolio Mix
Align your strategic objectives to your asset allocation. Keep in mind, your portfolio evolves as you go through life’s transitions. Typically, as a Gen Xer, you should focus on protecting your purchasing power with assets that have moderate risk and return. This means placing emphasis on lifestyle assets, but still keeping your growth potential and future legacy in mind.
Produce disposable income and growth to protect purchasing power. These assets have moderate risk and return goals.
- Dividend-paying stocks
- High-quality stocks
- Taxable / municipal bonds
- Income-producing real estate
Pass on to future generations or beneficiaries. The goal is to protect the purchasing power of the underlying assets, but not necessarily to produce the highest return possible.
- Growth equities
- Real estate
- Natural resources / commodities
- Absolute return strategies
A portfolio mix to maximize returns, often with much higher risk tolerance and volatility, that could have higher turnover and less tax efficiency.
- Momentum and growth stocks
- Emerging markets
- Alternative investments: Private equity, venture capital
ESG / Impact
10 years ago, even five years ago, conversations about impact investing would start with financial advisors asking clients, "Is this something you're interested in?" Today, it’s the clients proactively asking how they can back companies committed to best practices for environmental impacts, social responsibility, and corporate governance issues.
👉 Read more on:
- How investors are aligning their money with their values
- View our white paper on how to get started with impact investing
Today, over half of the global demand for gold is from jewelers and manufacturers for medical and electronic devices. The second-largest group of gold consumers is investors. Central banks, whose job is to control the flow of money, keep cash currencies and gold as part of their reserves.
👉 Read more on how to get started with investing in gold.
Compensation & Taxes
Negotiating Compensation: Many findings underscore that men tend to get better compensation packages because they’re more likely to ask for what they want.
👉 Read our blog on negotiating job offers
Taxes: Tax laws change frequently, and these changes have potential impacts on your investments.
👉 View a directory of commonly used Tax Terms
Divorce, Second Marriage, and Blended Families
Divorce is an extremely emotional and traumatic time, and probably the last thing you want to think about is taxes. It is easy for estranged couples to overlook the serious financial issues that arise as they seek to divide up their assets and establish independent lives. But even in the midst of fraught divorce proceedings, it is important to consider the tax implications of property division, custody arrangements, and child and spousal support agreements.
👉 Read more on 5 Tax Tips to consider in the case of divorce
Charitable Remainder Trust (CRT)
With a CRT, an investor contributes highly appreciated securities to a CRT, sells highly appreciated stock without capital gains tax, and receives an annuity income stream over her lifetime.
👉 Learn more about Charitable Remainder Trusts
👉 Read the top 10 reasons for a CRT
When life gives you a worthy cause, consider giving back.
👉 Learn about how you can leave your legacy and get started with philanthropy
👉 Understand the importance of considering all the Estate and Gift Tax planning options
Create a college fund for children / grandchildren: Read How to Get Started with 529 Plans
Estate planning: View our guide on Estate Planning
Caring for your aging parents:
Given the current state, it's also important to factor in inflation as you navigate your future life planning
👉 Here are some issues to consider during times of high inflation
How to Choose the Right Type of Advisory Firm
There are many different descriptions within the financial services industry for financial management companies, including asset management, wealth management, and family office services. So when choosing an advisor, it’s key to understand the differences between these terms and the capabilities that different types of managers offer. View this video or read more on choosing a financial advisory firm.
👉Also, read commonly asked questions on the differences in wealth and financial advisory firms.
Our goal is to address the gender wealth gap and to empower women financially in creative and dynamic ways. Everyone deserves the opportunity to benefit equally from engagement in financial markets and live a life they design with intent and purpose.