Tag - retirement advice

New realities for retirement for women

By Donna M. Phelan, MBA

Although it is improving, there is an economic cost to being a woman that reverberates into retirement. It results from multiple long-term socio-economic conditions.

The first is that women have consistently earned less than men, and real wages have stagnated.  Currently women earn about one-fourth less than men.  The disparities are even greater for black women, who earn about 30 percent less and Hispanic women, who earn about 40 percent less (census.gov). The Center for American Progress calculates that over a forty-year career life, that difference may add up to $300,000 for lower earners, $431,000 for average earners and $723,000 for higher earners.

Women are also less likely than men to start their careers in, or get promoted to management positions.  A March 2010 Catalyst article in the Harvard Business Review reports that “women continue to lag men at every single career stage, right from their first professional jobs.”  Women comprise only 5 percent of CEOs of the Fortune 500 companies.  A 2014 Grant Thornton International Business Report survey, featured in the March 6, 2014 issue of Forbes, found that the number of women in senior management has “stagnated” at 24 percent since 2007. This means that most women miss out on the majority of lucrative executive benefits that may help secure their retirement.

An August 14, 2013 article in the Wall Street Journal, quoted an Aon Hewitt study, which said that the 401(k) gender gap is even bigger than the gender pay gap. The study showed that the average man’s 401(k) savings was $100,000 dollars.  The average woman’s 401(k) retirement saving’s was $59,300 dollars– a full 40 percent less.

Women are more likely to leave the workforce for childcare and eldercare.  This redirects their resources of time, money and energy away from retirement saving.  It also hinders career progress.  Studies by Claudia Goldin of Harvard show that when women reenter the workforce, they permanently lag behind in pay and promotions.

Women who leave the workforce for caregiving also incur consequences for Social Security. Women receive about one-fourth less than men in Social Security benefits, $13,236 versus $17,004. Nearly 30 percent of women over age 65 rely on Social Security for virtually all of their income, a rate that increases with age. The percent of women older than 65 living below the poverty level of $11,670 was 11 percent versus 6.6 percent for men, and 18.9 percent versus 11.9 percent for those living alone.  Women who turn on Social Security early for financial reasons permanently lock in a lower lifetime benefit in what may be their only pension.

Women also tend to work in industries that don’t offer retirement plans, so they miss the opportunity for wealth building through an employer match. With women’s average income hovering around $38,345, it is difficult to see how women would have any discretionary income left over for retirement saving.

Marital status is also a factor. Married women fare best, divorced and widowed women next best. Never-married single women incur the most cautious outlook for retirement.

The longevity gap between men and women is narrowing, but women still outlive men, and end up living out their later years alone.  Greater longevity is accompanied by larger risk of diminished purchasing power due to inflation.

The many socioeconomic issues facing women and retirement raise concern. What if the old method of trying to save enough for retirement doesn’t work for women?

New strategies are needed if women are going to thrive in retirement. Women should consider working longer in their careers, and part-time in retirement.  Women should also consider non-traditional residence sharing – renting out empty bedrooms, getting a roommate, and downsizing.  With the savings from reduced housing expenses, women could make financial investments in income-producing vehicles. Women could also turn their hobbies – for which they already have the skills, tools and materials – into profitable home-based businesses.

Women need to understand the role they play in their own retirement and take responsibility. They need to become financially literate and realize they will need income for life.  Women need to create stackable income streams to empower their retirement security and meet their monthly spending needs.

Women should also start talking to other women about retirement planning.  What are their friends doing to prepare for retirement? What if they got together once a month over coffee to start a conversation about women and retirement? They might discover that they have ideas, talents and resources to share with other women, which might enhance the retirement planning experience and success of a larger scope of women.

About the author

Donna M. Phelan spent more than 18 years at some of Wall Street’s largest and most prestigious investment firms. She holds an MBA in finance from the University of Connecticut, and provides personal financial advice to clients coast to coast. The author of Women, Money & Prosperity: A Sister’s Perspective On How To Retire Well, she has lectured at conferences nationwide on a broad range of financial topics and has published numerous articles on investments, retirement and financial planning. Phelan was formerly president of the American Association of Individual Investors (AAII) Connecticut state chapter and was active in the Financial Women’s Association (FWA) in New York.


Giving to charity yields multiple benefits

“It’s a news story that never gets old: the little kid suffering from cancer who runs in a touchdown and gets a standing ovation, or is recognized by an entire city as Batman for a day, or the little girls who dress up for prom night because, tragically, they may not make it to high school,’’ says independent retirement advisor Gary Marriage, Jr.

“Retirees, who’ve lived full, mostly blessed lives, often wish they could do something for these children or another cause that touches their heart.”

Marriage, CEO of Nature Coast Financial Advisors (www.naturecoastfinancial.com), which specializes in maximizing retirees’ finances, says charitable efforts can provide a powerful sense of purpose and meaning to life – whether they come in retirement or during the working years. Marriage, for instance, is founder of Operation: Veteran Aid, which helps veterans and their surviving spouses with long-term care expenses by qualifying them with the Department of Veteran Affairs’ Aid and Attendance benefit.

He reviews four reasons why retirees should explore charitable giving.

• Voluntary vs. involuntary philanthropy: At the federal level, you can zero out your estate taxes by diverting what would have gone to the government in favor of your chosen cause. In a real sense, the government is a sort of charity; Through taxes, a citizen’s money goes into the social capital funnel. If you’re worried your tax money isn’t being spent wisely, consider a legitimate charity that you would like to support. There are legal leveraging techniques that can be used to make your taxed income skew more voluntary than involuntary.

• Smart from the heart giving: Each year, Americans give about $300 billion to charity. Like any investment, carefully consider to whom you’re giving; ask plenty of questions. Also, think about giving to underfunded charities. Finally, make your money go further by donating your time and skills to the charity. You’ll likely experience even greater satisfaction when you combine a donation of money and effort.

• The rewarding knowledge of your will: Only about 40 percent of Americans have this important legal document, which covers your estate’s executor, guardians for children and how to distribute your estate. A fourth component is gifts, which enables you to identify people or organizations to whom you wish to give gifts of money or specific possessions, such as jewelry or a car.

• Perspective on your money: Many people say, “…but I’m not Bill Gates or Warren Buffett – let those guys give their money away.” In fact, there are many “middle-class millionaires” – those who live modestly in middle-income neighborhoods, who have a net worth of $1 million or more. “These folks have saved money their entire lives, and they don’t donate money easily,” Marriage says. “However, others in their same situation have donated some of their estate and found it among the most rewarding acts they’ve ever done.”

About Gary Marriage

Gary Marriage, Jr. is the founder and CEO of Nature Coast Financial Advisors, (www.naturecoastfinancial.com), which educates retirees on how to protect their assets, increase their income, and reduce their taxes. Marriage is a national speaker, delivering solutions for pre-retirees, business owners and seniors on the areas affecting their retirement and estates. He is an approved member of the National Ethics Bureau, and has been featured in “America’s Top Hometown Financial Advisors 2011 and most recently selected to Co-Author a book with Steve Forbes titled, “Power Principals.” Marriage is also the founder of Operation Veteran Aid, an advocate for war-time veterans and their families.