Retirement Planning for Women

As a wife, mother and then grandmother, Janet didn't spend much time thinking about retirement plans or worrying about her financial future. Those issues were part of her husband's domain.

Then, he became terminally ill.

"We absolutely hadn't prepared for him to die at age 64," she recalls as her voice catches. Her husband's death, nine months after doctors discovered a brain tumor, is still difficult to talk about five years later.

Now, Janet is 66 and works as an accountant, using the college degree that she considers one of her late husband's legacies.

"He said, `If anything ever happens to me, I want you to have the ability to work whether you need to or not.' So, I went back to college when my youngest son was in the sixth grade. I graduated six years later, at the age of 51, with a degree in accounting, then started to work for the tax attorney who taught my last course.

More and more women like Janet are recognizing the need for better financial planning - particularly retirement planning. The reasons for this turnaround are as varied as the women themselves, but many of them are motivated by the very real danger that they will outlive their savings.

"I didn't want to be a burden to my children, and I really had no experience in making investment decisions," says Janet, explaining why she sought help. "I knew nothing about the level of risk I could tolerate, what amount I should put in tax-free investments rather than taxable investments, how to plan for major purchases such as a car. Here I am in my 60s, and how do you plan for big purchases?" she says. "I also knew nothing about how much liquidity there is in various investments in case of emergency, what commissions are charged, and how to look at my total picture. It overwhelmed me, even though I have an accounting background and had a handle on our day-to-day financial affairs."

She's not alone. And, unfortunately, one of the dangers of feeling overwhelmed by financial decisions is that it can - and frequently does - lead to postponing planning for retirement. The problem is potentially more serious for women than for men because women live longer - and research shows that women are under-funding their retirement. More than 25 percent of women baby boomers have not made any financial plans for retirement.1 And many of those who have begun planning aren't setting enough aside. One-third of all women have less than $25,000 in their 401k plans, and only 27 percent of women have more than $100,000, reports the National Center for Women and Retirement Research. Their lack of retirement savings is further compounded by the fact that more than a quarter of working women are employed in part-time positions, offering fewer retirement benefits than do full-time jobs.

For women who want to spend their golden years traveling, volunteering, or enjoying their hobbies, these trends are troubling. So is the fact that longer life spans and other social issues force women to run faster to keep pace with their male counterparts. Women know this - and are uncomfortable about it, judging from a recent survey that found that fewer than 50 percent of women feel confident that they are saving enough for retirement.

Women want to be financially independent, but too often worry that they don't have enough information, time or financial resources to get started. Instead, women tend to put their own retirement plans on the back burner while they take care of other considerations, like financing a child's college education or caring for elderly parents. Research shows women - much more so than men -- are faced with balancing multiple priorities. The combination of being time-deprived and other-focused is evident in their retirement plans. Many women worry that they don't have enough income to begin a retirement plan, not realizing that many mutual funds allow investors to put as little as $50 a month into a Systematic Investment Plan (SIP)1.

Janet received help from her advisor, a friend of her daughter-in-law's. Now, Janet is prodding other women in her family - her mother and sister, in particular - to become more active participants in their financial health.

Women should take action now. They should begin by organizing and evaluating their financial assets. The next step is calculating the amount of money they need to save for the retirement they want. Finally, they should put a plan in place to make it happen.

As straightforward as these basic steps sound, they are complicated by the unique demographic, social and financial issues that women face. The traditional rules may not apply.

Consider these facts:

• Demographic studies show that women retiring at age 65 can expect to live to age 83.
• Because women live longer than men do, three out of four are single when they die. Fifty percent of all women over age 65 outlive their husbands by 15 years.
• Women typically have fewer working years to fund their retirement accounts because of time spent out of the workforce raising children. USA Today reports that half of all women quit working at some time in their careers to care for children, parents or other family members. The average amount of time women take off work to care for their families is 11.5 years, according to Working Woman magazine.
• In divorces, women are awarded custody of the children 86 percent of the time. Of those who are entitled to financial help, 34 percent never receive the money that's due them, according to the National Center for Women and Retirement Research. The average woman's standard of living can drop as much as 45 percent in the first year after a divorce, reports the National Center for Women and Retirement Research.
• Even when everything else is equal, women tend to lag behind men in retirement savings because they invest too conservatively. Studies have found that women in general direct only half as much of their savings into stocks and stock mutual funds as men.

As troubling as the statistics are, it is not too late for most women to increase their retirement savings - and their comfort level. The sooner, the better. A study by Oppenheimer revealed that many women postpone long-term financial planning until a crisis occurs, such as a job loss, divorce or husband's death.

Janet says she had no retirement funds in her own name before her husband died.

"Our generation, we just really didn't talk about it," she explains. "The men made the decisions in most families. To me, it was just incredible to sit down and think, 'It's solely my decision now.' I have an obligation to myself and to my family to invest wisely so I can do the things I want to do and can take care of myself."

¹Investment Business Daily, 2/20/98; National Foundation for Women Business Owners.

ENB Associates Inc. is a wholly owned subsidiary of Evans National Bank. Securities are offered by O'Keefe Shaw & Co., Inc. Member NASD, and SIPC. Products purchased through O'Keefe Shaw may lose value, are not deposits with obligations of, or guaranteed by Evans National Bank or affiliates and are not insured by the FDIC.

The stories and people presented are fictional and for illustrative purposes only. Any similarities between real people and actual events are purely coincidence. Participation in a systematic investment plan does not assure a profit and does not protect against a loss in declining markets.