Mature Woman Executive

Are Women Too Focused on the Short-Term?

Women, Money and The Long-Term

How many short-term financial decisions do you make each week? You probably make more than a few, and they may feel routine. Yet in managing these day-to-day issues, you may be drawn away from making the long-term money decisions that could prove vital to your financial well-being.

How many long-term financial decisions have you made for yourself? How steadily have you saved and planned for retirement? Have you looked into ideas that may help to lower your taxes or preserve more of the money you have accumulated?

In a 2014 Prudential survey of 1,250 American women, 86% of those polled felt that they lacked knowledge when it came to choosing investment or insurance products, yet 95% of the respondents identified themselves as the financial decision-makers in their households.1 Does this describe you? Perhaps it’s time to work toward gaining more confidence and control over your financial picture.

Start by taking inventory. Look at your investments and savings accounts: their balances, their purposes. Then, look at income sources: yours, and those of your spouse or family if applicable. Consider your probable or possible income sources after you retire: Social Security and others.

This is a way to start seeing where you are financially in terms of your progress toward a financially stable retirement and your retirement income. It may also illuminate potential new directions for you:

  • The need to save or invest more (especially since parenting or caregiving may interrupt your career and affect your earnings)
  • The need for greater income (negotiate for a raise!) or additional income sources down the road
  • Risks to income and savings (and the need to plan greater degrees of insulation from them)

Devoting even just an hour of attention to these matters may give you a clear look at your financial potential for tomorrow. Proceed from this step to the next: follow with another hour devoted to a chat with an experienced financial professional.

1 – http://corporate.prudential.com/media/managed/wm/WM-womens-research-summary.html

A young woman executive in a financial meeting

Women, Don’t Retire Without…

A practical financial checklist for the future.

 

When our parents retired, living to 75 amounted to a nice long life and Social Security was often supplemented by a pension. How different things are today!

 

The good news is that life expectancy for women – as measured by the Centers for Disease Control – is now 81.1 years. The Social Security Administration estimates that the average 65- year-old woman today will live to age 86. 1,2

 

Given these projections, it appears that a retirement of 20 years or longer might be in your future.

 

Are you prepared for a 20-year retirement? How about a 30- or 40-year retirement? Don’t laugh, it could happen: the SSA projects that about 25% of today’s 65-year- olds will live past 90, with approximately 10% living to be older than 95. 2

 

How do you begin? How do you draw retirement income off of what you’ve saved, and how could you create other possible income streams? How do you try and protect your retirement savings and other financial assets?

 

Talking with a financial professional – a female financial professional – may give you some good ideas. You want an advisor who walks your walk, who understands the particular challenges that many women face in saving for retirement (time out of the workforce due to childcare or eldercare, maintaining financial equilibrium in the wake of divorce or death of a spouse).

 

As you have that conversation, you can focus on some of the must-haves.

 

You should plan your investing. Many women (and men) retire with a random collection of investments, and no real strategy. Some are big on “chasing the return” – assuming risk they really shouldn’t in pursuit of a double-digit yield. Others are very risk-averse, so fearful of what stocks might do that they stay out of the market entirely – and in the current low interest rate environment, that represents an easy way to fall behind and lose purchasing power to inflation.

 

You need a middle ground. When you are in your fifties, for example, you have less time to make back any big investment losses than you once did. So protecting what you have is a priority. At the same time, the possibility of a 15-, 20-, or even 30- or 40-year retirement means you have to keep a foot, if not both feet, in some kind of growth investing. Your initial retirement nest egg has to keep growing.

 

You should look at long term care coverage. It is an extreme generalization to say that men die sudden deaths and women die lingering ones; however, women often have longer average life expectancies than men and can require weeks, months or years of eldercare. Medicare is no substitute for LTC insurance; it only pays for 100 days of nursing home care, and only if you get skilled care and enter a nursing home right after a hospital stay of 3 or more days. Long term care coverage can provide a huge financial relief if and when the need for LTC arises. 3

 

Claim those Social Security benefits carefully. If your career and health permit, delaying Social Security  is a wise move for single women. If you wait until full retirement age to claim your benefits, you could receive 30-40% larger Social Security payments as a result. For every year you wait to claim Social Security, your monthly payments get about 8% larger. 4

 

Married women can look at spousal claiming strategies such as the “file and suspend” approach and claiming spousal benefits first. This may help to maximize the Social Security benefits you and your spouse receive.

 

Above all, retire with a plan. Have a financial professional who sees retirement through your eyes help you define it on your terms, with a wealth management approach designed for the long term.

 

1 – http://cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_06.pdf

2 – http://ssa.gov/planners/lifeexpectancy.htm

3 – http://medicare.gov/coverage/skilled-nursing-facility-care.html

4 – http://money.usnews.com/money/retirement/articles/2012/04/02/what-older-workers-dont-know-about-social-security

THE RETIREMENT REALITY CHECK

Little things to keep in mind for life after work.

Decades ago, there was a popular book entitled What They Don’t Teach You at Harvard Business School. Perhaps someday, another book will appear to discuss certain aspects of the retirement experience that go unrecognized – the “fine print”, if you will. Here are some little things that can be frequently overlooked.

How will you save in retirement? More and more baby boomers are retiring with the hope that they can become centenarians. That may prove true thanks to healthcare advances and generally healthier lifestyles.

We all save for retirement; with our increasing longevity, we will also need to save in retirement for the (presumed) decades ahead. That means more than budgeting; it means investing with growth and tax efficiency in mind year after year.

Could your cash flow be more important than your savings? While the #1 retirement fear is someday running out of money, your income stream may actually prove more important than your retirement nest egg. How great will the income stream be from your accumulated wealth?

There’s a longstanding belief that retirees should withdraw about 4% of their savings annually. This “4% rule” became popular back in the 1990s, thanks to an influential article written by a financial advisor named Bill Bengen in the Journal of Financial Planning. While the “4% rule” has its followers, the respected economist William Sharpe (one of the minds behind Modern Portfolio Theory) dismissed it as simplistic and an open door to retirement income shortfalls in a widely cited 2009 essay in the Journal of Investment Management. 1

Volatility is pronounced in today’s financial markets, and the relative calm we knew prior to the last recession may take years to return. Because of this volatility, it is hard to imagine sticking to a hard-and- fast withdrawal rate in retirement – your annual withdrawal percentage may need to vary due to life and market factors.

What will you begin doing in retirement? In the classic retirement dream, every day feels like a Saturday. Your reward for decades of work is 24/7 freedom. But might all that freedom leave you bored?

Impossible, you say? It happens. Some people retire with only a vague idea of “what’s next”. After a few months or years, they find themselves in the doldrums. Shouldn’t they be doing something with all that time on their hands?

A goal-oriented retirement has its virtues. Purpose leads to objectives, objectives lead to plans, and plans can impart some structure and order to your days and weeks – and that can help cure retirement listlessness.

Will your spouse want to live the way that you live? Many couples retire with shared goals, but they find that their ambitions and day-to-day routines differ. Over time, this dissonance can be aggravating. A conversation or two may help you iron out potential conflicts. While your spouse’s “picture” of retirement will not simply be a mental photocopy of your own, the variance in retirement visions may surprise you.

When should you (and your spouse) claim Social Security benefits? “As soon as possible” may not be the wisest answer. An analysis is needed. Talk with the financial professional you trust and run the numbers. If you can wait and apply for Social Security strategically, you might realize as much as hundreds of thousands of dollars more in benefits over your lifetimes.

1 – http://www.forbes.com/forbes/2011/0523/investing-retirement-bill-bengen-savings-spending-solution.html

financially independent woman

It’s All in Your Hands

A Post-Divorce Action Plan

You have just gone through one of the most challenging and difficult periods that a woman can experience in her life – a divorce. While many things may still be in up in the air, one aspect of your life that you should make sure you’re in control is your finances.

Financial planning for divorced women is not that much different than financial planning for married couples. Several basic elements are the same. However, the differences offer both good news and bad news. The good news: you can make plans and decisions based solely on your needs and goals. There won’t be miscommunication or conflicting ideas. The bad news: it’s all in your hands. Any mistakes will be your own and a poor decision can’t be salvaged by the income or assets of a partner.

The following post-divorce action plan offers a few things worth considering:

One way to counter the bad news is to find a trusted professional to seek advice from.

After a divorce, friends are often split between spouses. Financial representatives can be the same way. If you lost yours in the divorce or never had one to begin with, it’s a good time to consider finding a professional who can help you make sound financial decisions for your new life.

To find one, start simply. Ask friends or acquaintances who it was that helped them when they went through a divorce. The attorney who handled your divorce may also be a good source for a referral. It’s important to have someone help you who has previously assisted or – best of all – who specializes in helping divorced women.

Selecting the right financial professional for you is a critical step. After all, this person will be helping you with the important financial decisions you now have to face.

Long-term care insurance may become even more important post-divorce.

Long-term care policies are designed to cover the costs of care if you are unable to care for yourself because of age or if you become ill or disabled. Long-term care is especially important for women because they typically pay more for it than men do. The reason is simple: women typically live longer than men and usually require longer care during those additional years.1

A woman’s retirement is usually more expensive than a man’s.

The reason that women usually need long-term care insurance more than men is the same reason that retirement income planning for women may be more important. Women live – on average – 5 to 10 years longer than men. Eighty-five percent of people over 100 are women.2 This means a woman’s retirement savings must, on average, be stretched out over a larger number of years.

While, in general, retirement planning for a single person is easier in many ways than for a couple, remember … you can no longer rely on a spouse’s financial resources if a mistake is made. It’s important to review your social security estimates, any pensions you have and your retirement assets. You can then compare that to the kind of lifestyle you would like to have during retirement.

Because retirement may be more expensive, you may want to make an employer-sponsored retirement plan a larger deciding factor in any job search. Also, you may decide that you must retire at a later date than you had originally planned.

Update your beneficiaries and consider using a trust to help manage your assets. People often forget to update the beneficiaries of their life insurance and retirement accounts after a divorce. If not changed, your ex-husband may stand to inherit a large portion of your assets. Also, the estate laws give certain breaks to married couples that are not available to a single person. Establishing the proper type of legal trust may be a way to pass along more of your assets to your heirs, rather than to the IRS.

Finally, after you have moved on from your divorce there may come a time when you consider remarriage. It’s important that you understand the financial effects this may have. If you were married longer than 10 years you may be collecting or entitled to 50% of your ex-husband’s social security benefit. If you remarry you will no longer have that right. While you will become entitled to your new husband’s benefit, you must know if your new husband’s benefit will be lower or higher, and how that will affect your retirement.

Remarriage can also lead to blended families, blended assets and blended income. Your new husband may have his own family from a previous relationship. A financial professional can help the two of you prepare for this blending that satisfies the financial needs of each of you, as well as your new family.

While it’s all in your hands, partnering with a financial professional can help you move on to the next phase of your life with a more solid plan for your financial future.

1. http://www.wife.org/long-term-health-care.htm
2. http://www.time.com/time/health/article/0,8599,1827162,00.html

Do you have money questions

Delayed Gratification Today, For A Better Retirement Tomorrow

A little “delayed gratification” may help you retire more comfortably.

Baby boomers are known for wanting more out of life – and for living life on their own terms. They also get a bad rap as a generation weaned on instant gratification – wanting it all now, wanting to have it both ways.
It is neither wise nor truthful to paint a generation with a broad brush. What we do know in 2016 is that more Americans than ever are poised to retire. In fact, 10,000 Americans will turn 65 each day during the, last 6 years and for the next 12 years.1 Will their retirements match their expectations?
Are boomers in for a collective shock? Many boomers are used to affluence and expect creature comforts in retirement. Yet many may not understand how much money retirement will require. A 2010 study from the non-profit Employee Benefit Research Institute estimates that about half of “early” boomers (those aged 56-62) will face a retirement shortfall – someday, they will have inadequate income to pay medical costs and core retirement expenses. EBRI also estimates that 43.7% of “late” boomers (those aged 46-55) are likely to exhaust their retirement savings as well.2

Investing aside, what about the way we spend? EBRI research director Jack VanDerhei told TheStreet.com that beyond federal policy decisions, “[what is] even more important is to identify which of those households still have time to modify their behavior to achieve retirement security, and how they need to proceed.” 2

What is a need and what is a luxury? Now here is where it gets interesting. In a new survey of more than 1,000 boomers conducted by MainStay Investments, more than half the respondents identified “pet care” and “an internet connection” and “shopping for birthdays and special occasions” as basic needs. Almost half checked off “weekend getaways” and “professional hair cutting/coloring” as basic needs. Perhaps the definition of a “basic need” is expanding. Or perhaps we have gotten so used to these perks that we can’t imagine living without them (and not spending money on them).3
Boomers are necessarily growing more pragmatic. The MainStay survey results hint at a shift in their financial outlook. The survey found that 76% of boomers were willing to work longer and save more in pursuit of more retirement comfort.3
Additionally, 40% of those surveyed said they will have to delay retirement in order to afford their desired lifestyle – and 47% said they would be willing to live in a smaller house to have more of the above luxuries/needs. A whopping 84% of respondents indicated they would be willing to allocate a portion of their assets so that they might have consistent lifelong income. However, just 52% of them were in contact with a financial consultant.3
We can learn from our elders. Look at the sacrifices made by the “greatest generation”. World War II demanded so much from Americans, not only in the theatres of combat but at home. For several years, new cars weren’t manufactured, travel was discouraged, and food, clothing and gasoline were rationed. The entire economy was rearranged, and more than 40 million Americans had to start paying federal income tax.4
This generation certainly understood delayed gratification. Yet with all that economic and political upheaval, its members collectively enjoyed the most comfortable retirement in American history (and perhaps the history of the world).
Will we pay for today’s lifestyle tomorrow? Financially, that is a risk we face. Many of us have not saved enough for retirement, and the financial markets have been especially volatile of late. So it only figures that spending less and saving more today could help us out tomorrow. Who knows – if some extra effort is put in now, we may end up with enough money to “live it up” later.
Citations
1 – http://www.sacbee.com/2010/08/29/2990176/baby-boomers-signal-shift-in-what.html
2 – http://www.thestreet.com/story/10806795/even-wealthy-face-retirement-shortfall.html
3 – http://www.reeerisa.com/news/fe_daily.aspx?StoryId={66D70228-CEFE-4782-9058-F2F2DAB68DD1}
4 – http://www.nationalww2museum.org/education/for-students/america-goes-to-war.html

Money Issues Across Your Life Cycle

Some women are co-breadwinners while others are the only source of income. Throughout a woman’s life, she will experience many money issues unique to women. A woman may experience the following situations: lower earnings, lack of retirement planning, divorce, and fewer years in the workplace because of child-rearing or caring for older parents. Many of these issues can work against a woman’s ability to accumulate money and attain stable financial status.

Lower Lifetime Earnings

As a population, women generally earn a lower income than their male counterparts. The Equal Pay Act that passed in the 1960s was supposed to narrow the earning gap between men and women, yet a gender pay gap still exists today. Women who work full-time year-round still are paid 77% of a man’s pay ($37,000 for a woman compared to $48,000 for a man in 2009) (U.S. Census Bureau 2012). Inequities start early and worsen over time. Research has shown a 5% difference one year after college graduation and a 12% difference after 10 years. The only identified explanation for the unexplained gaps was gender discrimination (Arnst 2007; Boushey, Aarons, and Smith 2010).

Breaks in Career

Women are more likely to have gaps in their work years because of child-rearing (Duke 2010). Some women may leave their jobs for extended periods of time to go on maternity leave. Other women make the choice to stay home for an extended time, reentering the job market years later. During child-rearing years, some women may leave careers behind and choose to work part-time or find a job with hours that match closely with children’s school schedules. As a result, upon retirement age, women’s income and Social Security benefits are often lower than those of their male counterparts.
Women need to pay attention to any employer retirement plan or matched contributions that may have been a job benefit. Find out about retirement or savings before you leave the job. If money is invested in a retirement plan, can it stay until you are ready to retire? What are the options?

Divorce

The divorce rate in the United States is estimated at 36%–50% (U.S. Census Bureau 2010). In general, divorce creates a financial disaster for families and may leave a woman to raise children using less money. Spending may likely need to change when a divorce occurs. It is important to review monthly expenditures and establish a budget. Since cash flow may drastically change and not be the same from week to week, continue to review income and expenses. Depending on the number of years a woman was married, she may be entitled to part of her husband’s retirement income. Be sure all financial issues are revealed and resolved during divorce proceedings.

Care of Elderly Parents

Another family obligation that may interfere with building wealth is caring for an elderly or ailing parent or other family member. Women tend to be the major caregivers for sick or older parents. Some women may take a career break or retire early to attend to the full-time care of a family member. Even if a woman continues to work, caring for the family member may become a financial burden.

Widowhood

As women age, the likelihood of living alone increases. According to the U.S. Census Bureau (2010), among those 65 and older, 44% of women were married, compared to 75% of men. Widowed women account for approximately 40% of women 65 and older, but only 13% of men 65 and older are widowed (U.S. Census Bureau 2010). The average age of widowhood is 55 years old (U.S. Census Bureau 2010). A spouse’s death is not only emotionally exhausting, but also will likely end with financial consequences.

Lack of Retirement Planning

As a whole, women tend to focus less on planning for their retirement over the course of their career, having saved less for retirement than men. Because women are often the caregivers for the family, taking steps to ensure their financial future may take a backseat when other events occur.
Women are reluctant to taking risk. When women do put money into a retirement fund, it is often a conservative investment that earns lower interest rates than their male counterparts. Try to research investments and identify your best options.

What You Can Do to Prepare Yourself

Women can improve their financial status and retirement income. Financial planning and learning about investing are the first steps on the road to financial independence. Time is on your side when you start early. Small amounts of money saved and invested over time add up to a secure financial life.

(U.S. Census Bureau 2010)

The Bag Lady Syndrome

Many women worry about ending up destitute and in the streets in their senior years. This is the bag lady syndrome; it often stems from lack of confidence in knowing how to make and manage money. The bag lady syndrome ranges from women who have a lot of money to women who have a highly emotional relationship with money. To build up confidence you must explore your money mindset. What is your thought or belief about money and its purpose in the world? Your money mindset ultimately dictates how you save, spend, invest, and gift daily.

Source: Kingsbury, How to Give Financial Advice to Women

Building Your Divorce Community

A divorce can be one of the most challenging experiences in life. How you approach the divorce and manage the divorce both emotionally, legally and financially can have a huge impact on your ability to recover and rebuild a better life for yourself. They key is don’t try to go it alone.

Women work best in a community but when experiencing divorce you must build your community that can provide both objective advice while supporting and encouraging you to make the best decisions for your future so that you can heal and shine again.

It’s important that you formally ask for their help and to be available to you and a part of this community.

Your divorce community must incorporate one of each of the following.

  1. A family member who understands your situation and challenges but can also be objective with their advice and support.
  2. A friend who can commit to supporting you and provides sound and objective advice but who can listen and empathize when needed.
  3. An attorney that is recommended and that you LIKE with whom you feel will provide the best council.
  4. A Financial Advisor who respects women and provides not just investment advice but the education you need to understand your money and what it means to your future.
  5. A Life Coach who will not just be a sounding board but provide action steps to help you move forward and improve your life.

Think of a beautiful diamond ring, that diamond is held firmly in place by prongs that do not hold that diamond down but together supports that diamond so everyone can see its beauty and brilliance.

You too can become that diamond again, but it starts with building your community.

Estate Planning: A Woman’s Issue?

While estate planning is important to BOTH men and women, it often has a greater impact on women. Women (on average) live longer and tend to marry older spouses, which makes them three times more likely than men to be widowed at 65. So for women, estate planning is a crucial part of retirement planning. Since they usually survive their spouses, women more often have the last word about how much wealth goes to family, charity, and the taxman.

Source: forbes.com