Women Have Unique Financial Needs

The following is a guest post from Marotta Wealth Management.

Retirement planning is even more crucial for women than for men. Although most women are married, 85% outlive their husbands and are alone during their last years. Financial planning must address the unique issues facing older women who probably worked fewer years and earned less money than their spouses.

Sophie Tucker, whose early claim to fame was the song "The Last of the Red Hot Mamas," said at age 69, "From birth to age 18, a girl needs good parents. From 18 to 35 she needs good looks. From 35 to 55, she needs a good personality. From 55 on, she needs good cash. I'm saving my money."

Sadly, many older women lack good cash. Five of eight women rely on a husband's work records to receive their Social Security benefits. And for almost three of eight, those benefits represent 90% of their total income. Of those seniors who live in poverty, more than half are women.

Planning to have good cash must begin long before retirement. Many frugal and hardworking parents sacrifice to give their children the comforts that money can buy. In the process, however, they rob their children of character-building lessons they can only learn through personal experience.

This psychology is especially true for daughters, who are often protected from the discipline of handling money. Our daughters can only gain experience if we give them real responsibility. In other words, they need a safe way to learn the lessons of irresponsibility. As early as possible daughters should be given the slice of the family's budget that most directly affects them. By the time they are teenagers, they could be handling much of their own money.

A teenage budget offers financial training wheels. Only if teenage daughters are given money for clothes can they learn the tradeoffs between expensive outfits and other spending choices. Remember, not having sufficient money for everything you want provides a financial lesson that cannot be learned any other way. By giving your daughter enough money for all her wants, you're actually depriving her of future financial satisfaction and stability.

Be sure to include your daughter in family discussions about charitable contributions too. As children take charge of their own money, they can also learn generosity by choosing the organizations they want to support.

Parents are apt to require their sons to take a first job and protect their daughters from the working world. But by age 14 daughters should be working and funding their Roth IRA accounts. If you want to help, offer to match whatever your daughter earns so she can put your contribution into her Roth and still have spending money.

Every seven years a woman waits to start funding her retirement halves the amount of money she can save. Helping your daughter add $2,000 annually to her Roth IRA for the years between age 14 and 19 actually is a better choice than starting her at age 20 and funding her account for the rest of her life.

From age 18 to 35, Sophie says women need good looks. What they really need is a fiscally responsible husband. Often women leave the workplace completely to raise a family. Yet because women generally live longer and earn less, they cannot leave their retirement planning to later in life. A loving husband makes sure his wife's retirement isn't sacrificed to his career and the children's needs.

My advice to all women: Make your retirement a priority. You may be more concerned for your family's needs than for your own safety. Just as you must do in an airplane emergency, put on your own oxygen mask first so you'll be able to help those around you.

Fund your retirement even if you don't work. Unemployed spouses can still fund their retirement through traditional or Roth IRA accounts or simply by savings in a taxable portfolio.

Don't guess at the amounts you should be saving. Know what goal you are trying to achieve.

In addition to inflation and interest, retirement planning needs to take into account taxes, capital gains and the different ways to save: taxable, tax deferred and Roth. Retirement planning also involves projections of accumulating assets for 40 years and spending during a retirement nearly as long. You can't compute how much you should be saving on the back of a napkin.

Know what percentage of your retirement goal your current assets can grow and cover, so you can determine if you are ahead or behind schedule. It also helps to calculate if you are pacing yourself correctly. And then you can decide how much you need to be saving each month toward your retirement.

Pay yourself first. Your savings should be automatic. You won't miss what you don't see.

Automating your contribution to an employer-defined contribution plan is easy. If you aren't employed, you can still automate a taxable savings plan. Most brokers offer a link between your investment account and your checking account and also an automatic transfer between the two. It's a painless way to move money each month into your retirement or savings account.

Save and invest as little as $100 a month for 46 years earning 10%, and you can retire with a million dollars. And $500 a month grows to an astounding $5 million. Those gains can only happen if you start saving while you are young. If you are beginning later in life, you will have to save and invest more each month.

From age 35 to 55, Sophie says a woman needs a good personality. By that time in her life, Sophie was running her own company. At this point many women have finished raising young children and have time for business ventures. Serendipity in the business world often arises from our reputation for kindness. Sophie showed kindness even to strangers as a part of the Jewish practice of "tzedakah."

Best translated as "righteousness" or "justice," tzedakah goes beyond charity. It is the responsibility to reach out to others, giving of our time and money. According to the great philosopher Maimonides, the highest form of tzedakah is providing a person work so he or she can remain independent and self-supporting. Thus age 35 to 55 is a perfect time for women to turn their success into significance by starting a business.

From 55 on, Sophie continued to use her economic independence to help and empower others. She founded the Sophie Tucker Foundation, which contributed to a host of worthy causes.

Sophie Tucker continued working until weeks before her death at age 82. "The secret to longevity," she said, "is to keep breathing." Today's women are likely to keep breathing a lot longer. We recommend that women anticipate a retirement well into their 90s. Dying young isn't a good plan.

Preparing for retirement is more than putting money in an account. You must work periodically through mathematical assumptions and projections to ensure you will meet your retirement goals. Annual financial physicals ensure that your portfolio will remain as strong and healthy as you want to be.

Financial success is only one of the three components of a successful retirement. Having a healthy diet and staying active physically is equally important. And maintaining a good relationship with engaging and meaningful work is the most critical of all.

Sophie's gusto for enjoying a full life provided several generations with an example of a strong independent woman. Women at every age should be saving and investing at least 15% of the lifestyle they want in retirement. For every seven years they delay saving and investing, they cut that lifestyle in half.

Any plan older than two years is out of date. As your savings change, their projected value will cover a different percentage of your retirement goal. While market returns fluctuate and your standard of living increases, you may need to adjust your monthly savings. And your investments should grow gradually more conservative as you approach retirement age.

Financial independence opens doors for success and significance later in life. As Sophie Tucker reminds us, "I've been rich and I've been poor--and believe me, rich is better."

Comments

[Emma]

"From age 18 to 35, Sophie says women need good looks. What they really need is a fiscally responsible husband."

SERIOUSLY?!?

What this article fails to mention is the fact that women are financially hit harder by divorces than men -- and that's frightening considering how high the divorce rate is. I'm in my early thirties and still single (a total pariah, I know) but I'm in better financial shape than my divorced female friends!

Sorry, but I'm of the school of thought that retirement plans should be based on individuals, not their sex. This article is totally patronizing!

[Emma]

Okay, I should clarify that comment. Why treat women with kid gloves when it comes to financial planning? My parents encouraged my and my siblings (male and female) to get jobs, budget, save for school, start planning for retirement, etc. They didn't treat us differently because of our sex. Smart financial planning skills are essential for everyone.

(And if you've ever seen teenage males shop, you'd know their in as much of budget help as girls!)

I do take into consideration how long I might live (based on statistics), but when it comes to taking time off for kids, I know plenty of men who take time off as well. It's something both sexes should be planning for if that's what they want to do.

[Eric]

and marrotta strikes again! lol :)

[Aljon]

"Retirement planning is even more crucial for women than for men."

False statement. I quit reading right then assuming the rest of the article was patronizing and playing on emotions.

[MC]

I'm a forty-something career woman, and a huge feminist. And I don't think the article was patronizing--it addresses a real problem out there.

Which is that many women for whatever reason seem to think, if only they can/when they can find their millionaire a la "Sex in the City", "he" will take care of them for the rest of their lives so they don't need to worry about money themselves beyond college or whatever.

IMO, FMF left out one important thing: especially for a woman, birth control should be a big part of your financial plan! Even if your awful health insurance won't pay for it, make it your first priority. Make sure your kids are planned and few.

Nothing will kill a woman's financial future faster than 4-5 kids, even if you're married when you have them (& if you aren't, you're really sunk). Because divorce is extremely common and the woman in most cases will end up being responsible for raising the kids. Which includes not only what it takes to pay for the housing, clothes etc the kids need, but also often future college costs for the child. And while you are raising the kids you can't work hard enough/go to school and get ahead in a career--so you're sunk. And anyone who thinks "child support" actually covers half the expenses is dreaming (or is a man who has to pay it & is whining).

Want to know what kids cost to raise? Ask a divorced mom.

[FMF]

Eric --

Ha! Yes, he does seem to be good at stirring up the pot! ;-)

[TJ]

MC - agreed, it should be easier for fathers to get custody of the children upon divorce and raise them and thereby give the mothers the freedom to work and pay the puny child support, but there is a long history in this country of allowing primary custody of children to mothers that needs to first to be overcome. There has been some progress made recently in this area allowing more fathers to get primary custody, but courts are slow to change and it will take some time before women achieve the full equality that will come out of this.

One financial planning issue that I think sneaks up on both sexes for married couples with fixed income is the failure to factor in the reduction in SS benefits when one spouse dies. Sure you get to keep the higher benefit of the two spouses, but you don't keep getting both, and most people have dropped any life insurance by that point.

[Beth]

Good point, MC!

I had a good laugh at the part about teenagers and budgeting. (I used to teach high school!) I didn't notice any real difference between the number of girls and boys who had jobs, so I have no idea where the idea comes from that parents are less likely to urge their daughters to work than their sons.

Anyone who thinks that teens are only interesting in clothes, music and the opposite sex only has part of the picture. Most of my students worked so they could save for their post secondary lives (in addition to some spending money, of course). For some, that meant college or university, for others it was setting themselves up in an apartment with a car so they could move out when they got their first "real job".

Not all teenagers are alike, just as not all women are alike. There's usually more difference within a group than there is between groups, so we have to be VERY careful with posts like these.

I second the notion about planning as individuals. This article seems to assume that women get married and have kids at a certain age, and my life just doesn't fit that pattern.

[Crystal]

I'm glad I wasn't the only one who thought this article seemed odd...and dated.

My two closest female friends are in their mid-late forties. They did not/will not have kids and they have both worked through their lives. I don't think either one of them is set for retirement, but neither are their husbands...they aren't planning and saving in general. It's not because they are women, it's because they are two people who don't save well that are married to two other people that don't save properly. Pretty simple if you just think about each individual's habits.

Secondly, although women generally live longer than men, why would a specific couple ever assume one person would die a long time before the other? Won't most couples want to plan for retirement as though both people will survive into their 90's or even 100's? Wouldn't that better ensure enough money for whoever survives the longest?

This article did seem to leave me feeling patronized. Everyone should be well prepared. Not just baby-making, long-living females. The article seemed to be targeted to women less forward-thinking than the ones that read this blog.

If I ever needed someone to explain to me that I will probably live longer than my husband and should plan accordingly, I think I'd need much more help in life than the article above could give...

[billyjobob]

"Parents are apt to require their sons to take a first job and protect their daughters from the working world." haha ha ha...I'll have to tell my 3 sisters about this one (Im the brother). What a lousey article. What century is this writer living in. I didn't see that any of this advice would be for JUST GIRLS. I can't wait to see the article that will be just for us guys. You ladies wouldn't mind if we exclude you will you?

[Crystal]

Oh, and the title of the article led me to believe that they were going to list out unique female needs, like tampons. Or maybe even stereotypical habits like shoe hoarding or expensive makeup.

Living longer, working less, and realizing you need money for retirement do not seem like "Unique Financial Needs"...men who live longer and work less need to plan accordingly for retirement too, right?

[Eugene Krabs]

According to the internet, this Sophie Tucker lived from 1884 to 1966. She was also a Russian-born Jewish American. So, yes, she lived in a different place and a different time.

Interestingly enough, it would seem that she was originally deemed as too "big and ugly" for show business, but her personality and self-skewering humor more than made up for it, and even helped advance women's rights as well as actors' rights in theatrics.

Her strong belief in tzedakah and basic kindness is also quite admirable.

I also find it amusing that at least one of her songs (My Yiddish Momme) was banned and ordered to be destroyed by Hitler. However, she was told by a fellow German actor that her album thrived in underground in Germany.

It's fair enough to criticize the relevance of her advice. After all, our lives today are in many ways quite different from hers. But I'll bet she was a good soul who, at the time, championed for women's rights back in her day, as well as show-biz stereotypes. And she did so with generosity and humor.

So, in that way, thank you for sharing this piece. It's always interesting to learn something new.

[Jeff]

As far as interesting worldviews go, Mr. Marotta's got nothing on @MC.

[Jim]

"Parents are apt to require their sons to take a first job and protect their daughters from the working world."

More teenage girls work than teenage boys.

Currently 20% of the teenage girls age 16-17 work compared to 18% of the boys. Thats not just a result of the recession, in first quarter of 2008 the difference was higher with 25% of girls working and only 20% of boys.
It fluctuates but workforce participation has averaged about 2% higher for 16-17 yr girls than boys for about 10 years.

[Britt @ Your Roth IRA]

Great idea about giving your kids financially responsibility at a young age. It's better to learn the hard lessons early in life rather than later. Blowing your allowance doesn't put you in a big hole, but getting yourself into hundreds of thousands of dollars of debt in adulthood is the wrong time to learn a lesson.

Better than age 14, I've already started a Roth IRA for my daughter. Although she's only 1 and unable to legally fund her own, I intend for her to inherit mine in its entirety. If she doesn't use it until her 70's or 70's, that's a lot of compound interest!

[pla]

sound very difficult to be woman doesn't matter what ear you were born.. has to think ahead for yourself and family member.. humm...but i do agree with the way to teach daughter or son to learn to control their financial at the early age..