THE
FEMININE FACE OF FINANCE
Written
by Melinda “Myndi” Aven
When
it comes to investing, many women are forced to do more with
less. Because of their longer life span (5.3 years longer
then men on average)[1], women have an even greater need than
men to make the most of their retirement dollars.
In
addition, women often spend more years out of the workplace
to care for family members. According to a 2002 report by
the Women’s Institute for a Secure Retirement (WISER) on average,
a woman can lose $659,139 in earnings as a result of care
giving during her lifetime. Women work less than men (29 years
vs. 38 years) and neither Social Security nor private pensions
give individuals credit for care-giving years in calculating
benefits. The net effect is lower retirement benefits for
women. [2]
As
primary caregivers, women tend to have more career interruptions
and generally cannot rely as heavily on company-sponsored
insurance and retirement plans as men. According to the Bureau
of Labor Statistics in 2001, a woman’s average job tenure
is 4.8 years. Most company pension plans don’t even start
to vest until you are five years on the job. Fewer earning
years, lower salaries and more years after retiring mean women
simply have less money for retirement than men. The single
smartest thing a woman can do is to begin saving earlier and
investing more aggressively.
Historically,
even in households where women were responsible for paying
the bills, men handled most of the investing. In a recent
survey only 14 percent of women married or living with a significant
other felt responsible for preparing for retirement – a dangerous
sign since, unfortunately, one in two marriages end in divorce[3]
Young
women, just starting their professional careers would do well
to anticipate the future and start on a solid strategy towards
financial self-reliance.
Steps
women can take might include:
Establishing
solid goals. Be it a dream home on a lake or the ability to
take a year off and travel the world, concrete objectives
give you something tangible to strive for and make it easier
to assign a price tag to goals. Establish your goals, set
a time frame, list the steps you need to get there, and implement
your strategy. Start now.
Establish
and Maintain Good Credit. Carrying substantial credit card
debt keeps many people from reaching their savings goals.
If you have children, set this as an example for them, too.
Educate
yourself about investing and create a solid portfolio. All
investors should start as soon as possible to research financial
information and start saving. Even seemingly small amounts
of regular saving can build future financial stability and
eventual wealth.
Insure
your income. At minimum, women need health, auto, and renters
or homeowner insurance, but they should not overlook disability
income insurance. Insuring your income if you are the sole
breadwinner for your family cannot be emphasized enough. Some
insurance plans are available through an employer’s plan,
but they are only in force for your period of employment.
Those women anticipating a career interruption to start a
family should talk with a financial professional can help
determine what coverage is adequate for your particular situation.
Life
insurance can be an extremely beneficial tool for women of
any age. Younger planners can realize advantages by purchasing
life insurance early, because it costs less at younger ages.
Women who do not qualify for company-sponsored plans, due
to career interruptions or short tenure with an employer,
would do well to explore this option. In addition to providing
benefits to survivors, the owner of a permanent life insurance
policy can sometimes access the cash in the policy to realize
dreams such as paying for a child’s education or starting
a business. A good financial representative can help explain
and provide options to meet a variety of needs.
Contribute
to other retirement savings vehicles. For most people, a 401(k)
alone may not be enough for retirement. Women who take years
from working to care for family and children may benefit by
paying into a special retirement account known as a spousal
IRA. A non-working spouse can save up to $4,000 a year (as
of 2005 tax year) and deduct the amount from the family’s
taxable income. Utilize additional retirement strategies,
such as life insurance, savings accounts, CDs, bonds and annuities.
Team
up with a financial professional you can trust. Seek opinions
from many different people and remember that a good personal
plan requires time and patience to explore opportunities and
build a level of knowledge that leads to good decision-making.
A financial professional can help estimate how much you will
have saved by retirement and how long that will last you based
on your lifestyle. And if you are curious, use the longevity
game on NMFN.com to calculate how many years you’ll spend
in retirement.
For both women and men, it pays to create a clear vision of
one’s financial future, both in terms of a better focused,
less stressful today and a comfortable, more prosperous tomorrow.
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[1]
Center for Disease Control, February 28, 20052Women’s Institute
for a Secure Retirement, Your Future Paycheck Report, May
22, 2002 [3] MONEY/Oppenheimer Funds survey, May 14, 2002
