26 Feb Money Matters: Growing Your Nest Egg
Thinking about diversifying your portfolio beyond your 401(k)? Here are six investments to consider.
By Tanisha A. Sykes
In the United States, women outlive men. According to 2021
data from the US Centers for
Disease Control and Prevention, the average life expectancy for women is nearly 80 years, versus almost 74 years for men.
However, women lag behind men in retirement savings. According to the US Census, 22 percent of women have $100,000 or more in personal retirement savings, compared with 30 percent of men who have that amount.
This significant gap amplifies the importance of evaluating one’s nest egg prospects right now, and periodically.
“The longer you live after retirement, the bigger the pot of money you’ll need to draw from,” says Kathryn Kubiak-Rizzone, a certified financial planner (CFP) and founder of About Time Financial Planning in Rochester, New York. “There’s no magic bullet for investing success, but time is critical.”
The sooner you invest, says Kubiak-Rizzone, the more your wealth can grow, and 10 years can make a big difference. She gives the example of a woman investing $500 monthly from age 30 to 65. “Based on historical, inflation-adjusted returns, she’s likely to have around $1 million,” she says. “If she doesn’t start until 40, she’ll have less than half of that amount!”
There’s so much information out there; the hard part is determining which investment opportunities are right for you. If you have extra cash to invest outside your 401(k), do your homework, speak to a certified financial planner, and decide which investment suits your situation. In the meantime, here are six alternative investments worth considering.
Micro-investments. Hannah Morrell’s investing advice to women is simple: start small, microscopically small. “Try out micro-investing to test risk tolerance,” says Morrell, a holistic financial coach and founder of Yourworthcoach.com in Eugene, Oregon, who teaches people how to trust themselves with their money.
Micro- investing allows you to automatically invest modest amounts to buy and sell stocks, ETFs, and cryptocurrencies through apps like Acorns or Stash. Some accounts divert extra cash from a purchase to an investment account, while others send leftover change to a savings account. These investments allow women looking for alternative ways to build a nest egg to place their pinkie toes in uncharted waters while minimizing risk. “Diversification smooths out risk, and it also smooths out our reactions to changing markets,” says Morrell. “If one of your investments tanks, you might be less likely to panic if you’ve got investments in multiple places.” Morrell likes apps like Acorns because they make micro-investing in fractional stocks easy.
You can also put your dollars to work locally through platforms like the Small Business Bonds marketplace (SMBX), a site that connects small businesses to investors. Morrell cautions investors to read online reviews before they invest, and to verify that the platform is registered through the SEC. She adds, “As you’re reviewing platforms, make sure it’s clear how they’re making their money and when and how returns are paid out.”
529 accounts. According to the American Association of University Women, women hold nearly two-thirds of the country’s $1.54 trillion in student debt. To avoid perpetuating the cycle of educational debt for yourself and the next generation, Patricia Roberts, chief operating officer of Gift of College, a registry for college savings, suggests investigating 529 college savings plans. “When contributions grow in value, the earnings are not taxed while in the account,” says Roberts. “When withdrawn to pay for a wide range of higher education expenses—including tuition, fees, room and board—they are never taxed.”
Another perk: the account holder—let’s say the parent of a college-bound student—is always in control of the 529 account and can decide when to disburse funds. Moreover, she says, the beneficiary can be changed anytime, and anyone can contribute.
Real estate. In recent years, Stacy Caprio decided to diversify her portfolio. “After researching investments, I chose real estate because I saw its potential as an asset that would hold its value against inflation and appreciate over time,” says Caprio, who is familiar with the field through her work as a realtor and the owner of Heartofaustinhomes.com in Austin, Texas. Caprio purchases multifamily and cash-flow-favorable properties—where income exceeds expenses—or works with clients to achieve investment goals.
Her deals range from $50,000 land sales to multimillion-dollar homes.
Ask every question that comes to your mind during the process, says Caprio, who suggests that women tend to trust too much or worry that people will see them as uninformed as queries arise. It’s your investment, and you’re assuming the risk, she says, so fully vet the deal.
Her best advice for other women interested in investing in real estate? “It’s better to take a few months and get a good [i.e., undervalued] deal than to rush.”
Community investing. Love your local coffee shop, yoga studio, or bookstore? Invest in its growth. Community investing is socially responsible investing that earns returns for investors interested in contributing to worthy causes. Community development banks or credit unions may have programs that allow you to put your dollars to work locally by investing in CDs or promissory notes, with which an issuer, like a bank, promises to return the buyer’s funds with fixed interest payments in exchange for borrowing the money.
These off–Wall Street investments, says Kathryn Kubiak-Rizzone, “function similarly to a CD but can support things like regenerative agriculture, lending in low-income communities of color, affordable housing, and more.” Investing in your community can help you to create wealth for yourself while creating economic opportunities for others.
Franchises. Women own 41 percent of all the franchises that have opened in the past two years, per a 2020 Women in Franchising report. There are myriad reasons why women should consider becoming a franchisee. For one, franchises offer the flexibility of being your own boss without building the business from scratch. Moreover, you’ll be part of an established company with consumers who know and trust the brand.
Women also tend to be strong communicators, have excellent networking skills, and take a collaborative approach to getting the job done. These traits represent many core skills needed to run a franchise successfully.
Associations like the American Organization of Franchisees & Dealers note that becoming a franchise owner requires a lot of research, complex decision-making, and some soul-searching, so take your time. Educate yourself, make sure buying a franchise is a good fit for your circumstances, and speak to an advisor, attorney, and other owners before signing on the dotted line.
You. It sounds novel, but investing in yourself is one of the best ways to grow your wealth. “Getting a new certification, training, or degree could unlock opportunities for a higher-paying career and pave the way to greater life satisfaction,” advises Kubiak-Rizzone.
At a minimum, she says, shore up your emergency fund in a high-yield savings account with enough money to cover six months of expenses. “Beyond that,” she says, “think of it as an Independence Fund giving you the freedom to leave a toxic relationship or work environment with enough money to find something more fulfilling.”
Whatever you decide, speak to a financial advisor first, says Kubiak-Rizzone. “Getting one-on-one guidance from a fee-only CFP [certified financial planner] whose primary focus is advice and education can be a valuable investment.” DW
Tanisha A. Sykes is a seasoned journalist with 20 years of experience in media, publishing, and content creation. She is a frequent contributor to DW.
