A Portland girl weighs in on the Hillary Rosen kerfuffle

Portland is a place where people go their own way.  That's one of my favorite things about this city.  Another of my favorite things about Portland is that we are proud and voracious readers.
It's not unusual to see a person walking down the street reading a book.  We read in coffee houses.  We read at Powell's.  It's a place where it's cool to be smart.
This Portland girl is therefore about to do two predictable Portland things:  1) Move outside the bounds of popular opinion; and 2) read about a subject before I open my mouth.
Mitt Romney, the inevitable Republican candidate for president, recently commented that he uses his wife, Ann, as his expert on women’s issues.  Ann is a stay at home mother of five boys, a breast cancer survivor and suffers from multiple sclerosis.  To the extent that she represents the interests of independently wealthy married women who stay at home to raise their children, breast cancer survivors who have access to the best health care in the country and those who fight to overcome an incurable autoimmune disease that affects central nervous system, Mitt's reliance upon his wife for advice about women's issues is relevant and admirable.

The totality of women's issues, however, are far more numerous than those in the realm of Ann Romney's experience.  For instance, the average American woman

• Lives longer than men,
• Earns about 20% less than men, and
• Spends eleven of her productive earning years as an unpaid family caregiver

In light of these facts, it's not surprising to find that twice the number of elderly women live in poverty than elderly men.
Hillary Rosen's comment that Ann Romney “never worked a day in her life” was admittedly inaccurate.  Any reasonable person knows that raising a family is hard work.  What is true, though, is that Ann never worked outside her home a day in her life.  That means that women's financial issues pertaining to half the US workforce, and over half of all women, are not shared by Ann Romney.  When Mitt seeks counsel from his expert on women's issues, his expert is one who is lacking in background and experience that pertain to a majority of other women.
Ms. Rosen's comment should not digress into a commentary about whether women who raise families are working.  They most certainly are.
But they are not experts in the issues faced by women who work outside the home.
That is the issue.

The Female Retirement Dilemma

Issues involved with planning for retirement are different for women than they are for men.  And understanding them can be the difference between comfort and poverty in our old age.

I.  By Saving the Same Percentage, We Retire with Less Than Half Than Men

Let's look at the result of both men and women putting aside 10% of their earnings for retirement.

First, women current earn, on average $.80 for every dollar men earn.  So now, for every $.10 in men's retirement accounts, women have $.08 - 20% less.

Next, women spend an average of eleven years of their productive working lives as an unpaid caregiver for a family member.  Assuming a work life from college graduation at 22 to retirement at 65, that unpaid absence lessens our earning years by another 25%.  That reduction in lifetime earnings, added to the fact that we lower salaries, results in us having $.06 for every $.10 men save for retirement - or 40% less.

So, if we assume average annual earnings of $60,000 during their careers, men will save $258,000 and women, $154,800, assuming that those savings are invested in assets that keep up with inflation. 

At 65, a man will need ten years of retirement income from savings of $258,000.  Invested in assets that keep up with inflation and taxes, he will have $25,800 per year for ten years. 

A woman, because of her additional life expectancy will have a sixteen year retirement with savings of $154,800.  Invested in assets that keep up with inflation and taxes, she will have $9,675 per year.

No wonder twice as many women than men live in poverty.

II.  What To Do

First, homemakers who care for children or parents should have Spousal IRA accounts funded on their behalf every year.  Considering that replacing all the functions provided would total approximately $30 thousand per year (Source:  http://www.womenwork.org/resources/tipsheets/valuehomemaking.htm), it is only reasonable that your retirement is funded while you provide these services at no charge.

Second, women must learn to invest their retirement assets in a way that will maximize growth without taking an inordinate amount of risk.  The two long term investments that provide the highest return are stocks and real estate.

In the last few years, we have witnessed the volatility both these investments have.  But, let's put this into perspective.  The stock market high was in August, 2007.  Just over two years later, the market is down about 30% from its high.  There are two considerations we must make:

• These are long term investments, intended for use in ten years or more.  In the 30+ years since I've been in the business, I've witnessed a years-long 50%+ correction in the 70's, a heart-stopping drop in the '80's, a precipitous fall in the 90's, the dot com bubble bursting in the early part of this decade and the current correction.  These are predictable, and those who have made wise stock investments and held them have fared far better, even at this point, from those who put their money in so-called "safe" investments, like money market accounts, Treasury Bills and insured savings accounts, which fail to stay ahead of inflation and taxes.  Note that there were two times billionaire investor Warren Buffett publicly admitted to buying stock in US companies:  once, during the correction in the 1970's; and the other, from March to year end, 2008.
• Even at retirement, we have life expectancies that mandate we stay ahead of inflation and taxes, and therefore advise consideration of keeping at least a portion of our long term portfolios in capital markets.
• Conversely, our short term (five years or less) cash flow needs must be kept in safe investments, so that our expenses are met and we are not tempted to sell our long term investments during market lows. 

Third, we've seen the outcome of abdicating responsibility for our financial lives with the likes of Madoff, Stanford, Enron, WorldCom and others.  There is no one who will take more of an interest in our financial health that ourselves.

It requires only that we gain the knowledge to take action and the willingness to provide for our future.

Important Pricey Leather Handbag Information

I.  Gender Marketing says. . .

Men identify deeply with their jobs.  They're hardwired for task orientation.  When they lose their jobs, they tend to lose their identity.

"Women are . . . worried about their jobs, but not to the extent that they feel their . . .existence is being threatened, and so they are in the mood to buy despite the crisis," gender marketing expert Diana Jaffe told Reuters recently. 

So, do we conclude that men face the current economic slump by questioning their identity and cutting back on spending, and women make themselves feel better by shopping for pricey leather handbags?

II.  Why do we buy?

Maybe watching "Madmen" has hurled us back in time and made us behave as though we were living in far less liberated 1960's.  Maybe we are taking the ostrich approach to managing our money, and, like Nero, are fiddling while Rome burns.  Maybe, in this particular case, we should behave more like men - but for very different reasons.

We need not define ourselves by the way we earn a living in order to face our current economic situation.  We can continue to be well-rounded human beings who know that our net worth and our self worth are very different.  But in order to pursue the things that bring us happiness, we'd best ensure we have a roof over our head and food on our table in our old age before we buy "pricey leather handbags."

Yet, the fashion industry send us messages - four times a year, via preposterously thin teen-age girls - that we "need" what they offer.  Do we?  Does spending money on handbags and shoes really make us feel good enough to forego providing for our long term needs?

III.  Put Yourself First

If you have put aside enough for yourself to live comfortably for the rest of your life and you need a handbag, by all means buy one, as long as you have the money.  But if you have not provided for your long term security, exactly what do you accomplish by buying something that you truly cannot afford? 

The appearance of wealth is nothing.  It is for someone else.  It speaks to others - not you.

IV.  You Say

Times are difficult.  Current times are more difficult than the grueling recession that took place in the 1970's, when I began working in finance.  It was a time when wealth was lost in a grinding market correction that took place over years and cut portfolios in half.  Inflation was out of control and job losses made the national mood grim.  It was also the time when Warren Buffett invested heavily in the stock market and earned wealth that is measured only slightly less than that of Microsoft founder Bill Gates.

It is your right to buy whatever you want, whenever you want.  You can be tempted by the fashion industry to buy gladiator shoes, designer bags or whatever it is - as long as it speaks to your authentic self.

You can also decide to put that money aside in investments that will outperform the ravages of inflation, like stocks and real estate, which will provide for you for the rest of your life. 

One in four of us will live to age 95.  Elderly and destitute with a pricey handbag in my closet, is not the choice I make for myself.  I invite you to join me in defying gender marketing research, and investing your time and resources in investing in your future.