Investing For Your Future
Monthly IFYF Investment Message
October 2006
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Are you a baby boomer woman between the ages of 42 and 60 (in 2006)? If so, it has been said that your "retirement clock" is ticking as loudly today as that proverbial "biological clock" once did. While both men and women need to prepare for retirement, women have some unique concerns. Women live longer and earn less, on average, than men do. Nearly 2 of 3 working women earn less than $30,000 a year and about 9 in 10 earn less than $50,000 a year. Women retirees receive only half the average pension benefits that men receive and average 13 years of zero earnings in Social Security benefit calculations.
The 2004 median (halfway point) retirement income of women was $12,080, compared to $21,102 for men. For a quarter of older women, Social Security is their only source of income. Another problem that affects significant numbers of women is the integration of pensions and Social Security. For low earners, pension plan benefits are often completely offset by Social Security, resulting in no additional retirement income.
What can women (and men) of all ages do to increase their financial security in later life? Consider the following five suggestions from the Women's Institute for a Secure Retirement or WISER (www.wiserwoman.org):
- Make retirement planning a priority. Learn as much as possible about available employer retirement savings plans and incentives to save such as employer matching of workers' contributions. Contribute at least as much as the amount needed to earn the maximum match and preferably more.
- Educate yourself about "longevity risk." Women often live longer than men and need to make their assets stretch further. Type the words "life expectancy calculator" into an Internet search engine (e.g., Google) and test out several versions.
- Avoid taking money out of retirement accounts and using it for children's needs. This includes college expenses. Selfish as it sounds, if you cannot afford to save for both college and retirement, remember that there are always loans and scholarships available for college expenses but no such options exist for retirement. The best way to invest for retirement is through a tax-deferred savings plan such as an IRA or 401(k). See Unit 8 of Investing For Your Future at www.investing.rutgers.edu for details.
- Stop taking a passive role in financial decision-making. At some point in their lives, most women will need to manage their money alone. Know the location of important financial documents and participate fully with your spouse or partner in discussions about topics such as investments and estate planning. The WISER organization also cautions women that "a man is not a plan."
- Stay educated about personal finance topics. Read one personal finance book each month or magazines such as Money, Smart Money, and Kiplinger's Personal Finance. In addition, perform annual "financial maintenance" activities such as reviewing your Social Security benefit statement and requesting a free annual credit report to review for errors and evidence of identity theft.
Another personal finance resource for women is the 192-page Cooperative Extension book Money Talk: A Financial Guide For Women. Single copies are available from co-author, Dr. Barbara O'Neill, for $23, including shipping. Please contact Dr. O'Neill (http://www.rcre.rutgers.edu/personnel/individual.asp?id=416&s=s) for additional ordering information. For multiple copy orders with quantity discounts, visit the publisher's Web site at[ http://www.nraes.org www.nraes.org].