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.

Happiness Is. . .

"Happiness is," said a song that was popular when I was a girl, "different things to different people."

A few days ago, New York Times columnist Maurine Dowd noted that the General Social Survey, "which has tracked America's mood since 1972," found that men are getting happier and women are "getting gloomier." Ms. Dowd quotes Marcus Buckingham, a former Gallup researcher and current Huffington Post blogger, as noting that "women begin their lives more fulfilled than men, as they age, they gradually become less happy."

From the women of The View to moms on the playground, opinions about why this state of mid-life malaise abound.

• Our lives are more crowded with our increased options of family, work, friends
• Our biology makes us more sensitive, and therefore vulnerable
• Our culture is youth obsessed, especially as it relates to women

Stretched too thin, feeling responsible for far too many things for time to allow, becoming less and less culturally attractive, who would NOT feel unhappy? In every discussion I've heard, reasons are many, but, as Ms. Dowd concludes, the answer is a paradox.

Perhaps. But, maybe our answer is the fact that we simply do not take time, individually and as a group, to address our unhappiness. Perhaps we have invested our time, energy and resources in others and have left ourselves feeling impoverished. As a person who has earned her living in advising others how to invest their wealth, I now wonder whether the same structure that one uses to develop a portfolio can address this problem. Here is a general example of how this process works.

• What is your goal? In investment terms, the answer is a number. In life terms, the answer is your response to "What makes you happy?" Answering that question requires enough time to consider what it is that brings you true joy. It's much easier to say, "I don't have time to think about that," than "I don't know what makes me happy." The latter statement is a symptom of not having nurtured oneself. And, over time, that lack of nurturing will likely result in deep unhappiness.
• What must you do to achieve your goal? In investment terms, this answer requires both sacrifice and risk. Sacrifice involves putting money aside for the future, and risk involves investing in assets which can, as we have all seen lately, fluctuate wildly in short term price, but, over the long term, earn more than inflation. In life terms, we must also be willing to make sacrifices and take risk to get what we want. We must develop a strategy to acquire those things that bring us great joy, whether they be experiences or self expression. We must surround ourselves with those who will help us, and rid ourselves of those who will not. We must cease to think of providing for ourselves as "selfish," and begin to treat ourselves as the valuable beings that we are.
• What must you do to stay on course? In investment terms, this requires a minimum of an annual check-up to measure progress. In life terms, we must also constantly monitor our progress, and ensure that we do not allow ourselves to feel guilty, unappreciated, dismissed, or any other negative emotion about achieving what it is that we want.

By following this investment structure, we will find that our lives cannot become too crowded for ourselves, because we will filter out that which is not fulfilling our life goal. We will expand our sensitivity to ourselves by putting ourselves first, without a moment's thought that we are being selfish. We are merely nurturing ourselves in order that we can be more nurturing to others. Finally, we will dismiss any assertion that we are not attractive people. We will value ourselves much too highly to think we must look any certain way in order to be attractive. We will define ourselves by our own standards.

Then, we may give our daughters, nieces and young women friends the priceless gift of valuing themselves on their own terms. And, perhaps, like us, they will use their options to achieve happiness as they define it.