So far, the first half of 2022 has proven to be a very uncertain time for investors. First-time investors and female investors have been even harder hit, as the gender pay gap mean women on average have less money to invest or save. According to the World Economic Forum, a cost-of-living crisis sparked in part by higher fuel and food prices is expected to hit women the hardest. In addition, while on average women earn 83 cents for every one dollar a male counterpart earns, the gender pays gap costs women millions of dollars in lost retirement income, if they invested all of the money lost to the gender wage gap.
The good news? Female investors are starting earlier, with virtual investing platforms and automatic enrollment in 401Ks. According to Fidelity’s 2022 Money Moves study, the next generation of women (18 to 35 years old) started investing in a brokerage account at an average age of 21, compared to age 30 for older women who started to invest during the same age frame. 
We’ve talked before about women having less confidence in investing and they often doubt themselves. Ironically, women investors’ returns were 0.4% higher than men’s, according to Fidelity’s 2021 Women and Investing Study, which looked at returns from January 2011 to December 2020, as cited by CNBC In addition, while many women question themselves and may be more cautious about investing, especially during volatiles times like the last two years,
I’m here to help my clients prepare for their futures, whether they are just starting out or wondering if they’ve saved enough. I always emphasize, no matter where you are in your career, whether you are just starting to save, are ready to retire or have already taken the plunge - it is never too late to start.
For both my younger clients just starting out and those near the end of their careers or already retired, the issue is the same. Liquidity – how much do you need? And then, use the bucket approach.
For my younger clients:
If you are living paycheck to paycheck but have little or no debt, you should first ensure you have 3-6 months emergency fund, based on your occupation. This matters because if you lose your job but you are in a hot market or field, you will be more likely to get back on your feet with a new position, compared to other occupations. This is your first bucket.
Next, determine how much you can put into your employer plan. If you who won’t be touching your employer plan for many years, I suggest you invest as much as they can. Contribute the max amount to qualify for the employer match, and do even more if you can! The overall goal is to invest the greatest amount you can into a 401K, health savings plan or Roth IRA, AND then don’t touch it. This can withstand the ups and downs of the market. This is your second bucket.
Even though the market is down, this is the time to do it. If you have the ability to put more away and can do it- just do it. It will grow.
And again, do what you can to max out your contributions to your employer plan.
For my older clients:
For older investors who living on investment from stocks and bonds, we know inflation is affecting your income streams.
I hear from clients who are retired or nearing retirement asking me what to do with their investments and the answer is each situation is different. But I still recommend you should follow the bucket rule.
If you aren’t going to take any gains out for the next 5 years, you should hold the course. If you are on a shorter time line, I suggest you re-evaluate what you have coming in, what’s going out- what are your fixed expenses? This is your first bucket.
Once you have the complete picture, if you are in need of shorter-term goals, we may peel off a piece of your investments and put it into a conservative investment like a fixed index annuity. With this option, you can’t go backwards, the worst you can do is not gain anything. Because it’s tied to an index and has a capped rate (currently around 5-6%) you are limited in what you’ll gain. If the S&P comes back and hits 10% returns, you aren’t going to recognize this. However, if it drops you aren’t going to lose due to the cap. With any change investments, you need to keep in mind, annuities come with a surrender charge so if you sell it before the term is up (usually 5-7 years) you’ll incur certain penalties.
I also recommend clients try not to panic. Don’t look at your investments every day. We know the stock market has wild rides and the S&P’s average annualized return since its inception is right around 10 percent, according to Investopedia. However, when adjusted for inflation, the historical average annual return is only around 7%.
We always recommend clients diversify capital between different classes of investment to manage risk. That way, under-performance in one type of asset may be offset by the performance of another. Diversify to balance ups and downs. This is your second bucket.
Remember we are here to help, ask advice and share your concerns. Our goals are to help you plan for the future you want. And, it’s never too early or too late to get started.
Katy Ufferman (ChFC) is a chartered financial consultant with Maxwell Financial Management and leads the firm’s practice dedicated to helping women with their investments and retirement planning. Read her latest blog at https://www.maxwellfm.com/blog.
The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.