Sunday, February 24, 2013

10 Things about Money, Men and Retirement in 30 minutes

A few quotes to get us started:

"I never retired." - Doris Day, American actress

"Money is the opposite of the weather. Nobody talks about it, but everybody
does something about it."
- Rebecca Johnson, contributing editor for Vogue magazine.

"Money, if it does not bring you happiness, will at least help you
be miserable in comfort.”
- Helen Gurley Brown, editor-in-chief of Cosmopolitan magazine.

If you had 30 minutes to tell a group of interested women what they need to know about money, men and retirement planning, what would you say? In a couple of weeks, I'm part of a work shop hosted by an investment adviser who has asked me to "keynote" the session and be available for follow-up questions.
Boiling things down to 30 minutes is a bit daunting. I've reported and written about so many topics related to women and money with the ultimate mission to change the way women plan and save for retirement. So here's what I expect to share in my 30 minutes.
No. 1: If you have daughters or granddaughters, teach them early about money....saving it, investing it and the importance of taking responsibility for their financial futures. Girls are not being educated about the importance of delayed gratification, the dangers of credit card debt and what it means to their old age if they fail to save for retirement.
No. 2: Teach your daughters and granddaughters about well-paying jobs. Women are attracted to "giving" kinds of professions...journalism or the law, for instance. How much a job pays is often secondary in girls' minds. Young men, think just the opposite. They look into jobs that are interesting to them AND also pay well. We must encourage girls to seek professions that are rewarding but offer financial security if they are on their own. Then we must teach them to financially plan for the long term.
No. 3: Women outlive men. Average life expectancy for women is four or five years longer than men. In reality, women may live many years longer than their spouse and be on their own emotionally and financially into their 80s and 90s. This fact must be discussed when couples plan for retirement. There are other possible pitfalls --The financial burden of long-term care that can drain finances, leaving women on their own in poverty. Fact: 20 percent of single women over 65 are living at or below the poverty line. Nearly half of all American women over 65 are single.
No. 4. Women are too conservative, too trusting and overly tolerant when it comes to managing their money. (All you have to do is read about Doris Day and her manager husband.) We tend to hang on to bad investments and bad financial advisers much longer than men do. We invest too conservatively compared to men. We don't save as much because we consider our income, if we work outside the home, as secondary to our spouse's. We are in and out of the work force because we have children or care for elderly parents.
As a result, we save less in our own names for retirement but we live longer and have less money to live on in our old age. And by the way don't give money to your adult kids who may have financial challenges. Your retirement comes first, unless you plan to live in their basement when you're old.
Meanwhile, elderly single women are sitting ducks for financial abuse and fraud. Much of it is perpetrated by a family member. Prepare for a trusted person, maybe a bank trust officer, to manage your money when you no longer can. Educate yourself about every aspect of getting old. Don't let a crisis dictate what happens.
No. 5. Baby boomers are divorcing at twice the national average. Men may end a marriage because they look in the mirror and decide they just don't want to feel old. The company of someone much younger can be very appealing. Or they may feel they have only a few years left and want to move on. This may come as a shock to the women they are married to...women who had expected to drift into old age with their mate. Instead they are on their own emotionally and financially without the skills or money management experience to manage. Keep in mind that many states (Washington) are "community property" states....legally that means a divorcing couple just adds up all their assets and all their liabilities and divides down the middle. Not a pretty picture if half the assets that you thought would be yours if your husband died disappear along with him.
No. 6. If you are working...stay on the job as long as possible and don't claim Social Security benefits, ideally until you're 70. Every year you wait to retire after 62 means an 8 percent raise in your eventual Social Security monthly benefit. Check out what your benefits will be at various ages.
No. 7. Make the 4 percent retirement withdrawal rule, a 2 percent rule when you start tapping into your nest egg. The S&P 500 index of the largest 500 U.S. companies has increased in value and payout on an average of 2 percent a year over the past 70 years. That means taking out 2 percent a year (in ordinary years) will leave your principle savings intact for the lean years. Two percent means income of $10,000 a year on $500,000 in savings. (Not much, huh.)
No. 8. Figure out your net worth. Just take all your assets and subtract the liabilities...mortgage debt etc. Your net worth should be going up every year as long as you're working. Then get out a work sheet and plan for retirement: Do a retirement budget...what's it going to cost to pay your household bills, to travel, buy gasoline, to eat out?  Check out what you will receive in benefits from Social Security. Then look at your retirement savings. What can you afford to withdraw a year? How long will your money last in retirement? What do you need to do to narrow the gap (if there is one) between living costs and retirement income?
No. 9 Build your investment confidence. Buy a stock or two that you like. You can do this on your own or through a broker. Buy something that pays a dividend, track it. Add to your portfolio. Reinvest the dividends as long as you can. Follow market activity, read business news reports (the Wall Street Journal, Fidelity.com). Stay up on current events but don't get overly fearful or too excited about day-to-day ups and downs of economic news. Tell your daughters to start investing in their 20s and they will have a sizable nest egg by the time they retire at 65. ($5,000 a year at 8 percent means $1 million at 65). Even if you have a good broker, make sure you know everything about what he or she is doing with your money. Ask tough questions about commissions and fees for investing in certain products such as mutual funds or annuities. They have to make a living. Just make sure what they're charging is worth it and ultimately to your benefit. (Let me tell you sometime about the $50,000 my mother, who was 83 at the time, put into a variable annuity and lost it all.)
No. 10 Life goes on after 60 even though we may lose people we love. My best friend died at 60. Her husband has remarried. I divorced at 60 and have happily remarried. But many of us will be totally on our own for a long time, if not the rest of our lives. Among my women friends, three have lost husbands to cancer in just the past five years. All were in their 60s.
Parents become truly elderly and need guidance and care as my 98-year-old mother does. Children continue to need our support. Through it all, money and how you management it, are key factors in a successful transition into retirement.
Don't put off thinking about it. Don't put off planning for it. You can make up for lost time and have fun doing it. You've got to be in the game!
I think that's my 30 minutes. Questions, anyone?
"If you’re given a choice between money and sex appeal, take the money. As you get older, the money will become your sex appeal.” — Katherine Hepburn, American actress.

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