Women, Retirement and Social Security

Which of the following are reasons that Social Security is especially
important to women:

a) Women are less likely to have pensions when they retire.
b) Women live longer than men, increasing chances of outliving their
assets.
c) Women have average lower lifetime earnings because of pay-inequity
and time out of the work force to care for family.
d) All of the above.

The answer is d) all of the above.

Women are living well into the eighties and many will spend more years
in retirement than they ever did working. As you can imagine, this is
placing a tremendous strain on the Social Security system. One of the
best ways to be prepared for retirement is to prepare yourself.

"Forty-two percent of all women over seventy-five are living on less
than $13,000 a year, and when Baby-Boom women retire, only an estimated
twenty percent of them will be financially secure" according to a
special report titled "Why Most Women Can't Afford To Retire" in the
current issue of Ms. Magazine. It is estimated that only 20% of boomer
women (born between 1946 and 1964 will be financially secure in
retirement.

Here's some wisdom for women planning for retirement:

1. Statistics show that 80% of women will need to take charge of their
own finances at some point in time. It is important for them to fully
understand their personal finances and investments. If you don't
understand your finances, ask your husband to explain them to you,
enroll in a class and your local community college or learning center
or check out some financially related books from the library.

2. It's never too soon to get started investing for retirement. The
sooner you get started, the longer you have to let your money work for
you. Don't put off saving. Just $25 a week starting at age 35 could add
up to $100,000 to your nest egg before retirement. Start now, automate
the process by having the money automatically deducted from your
paycheck before you have a chance to spend or even see it.

3. Whenever you take a job, always ask about their pension plan. Find
out how long until you are eligible, vesting requirements, will the
employer contribute to and/or match your funds and if so, at what
percentage rate?

4. Beware of taking Social Security early. Currently, the retirement
age for full benefits is 65, and the earliest age at which one is
eligible for benefits is 62. If you take your retirement benefits
early, the result is reduced benefits by as much as 30 percent for as
long as you live. The eligibility age for full Social Security benefits
has been revised from 65 to 67 years of age, to be phased in by the
year 2022.

Here are a few resources on Women and Social Security. Some sites
represent different viewpoints. It is good to be aware of the different
opinions and to realize that the more you can save for your own
retirement, the better off you will be regardless of what happens with
the Social Security System.

Interesting Links:

The Social Security Administration: To read about available programs
and to order a statement of your estimated future benefits, call (800)
772-1213 or check out their web site at http://www.ssa.gov

Take a Social Security Quiz: http://www.women4socialsecurity.org/quiz.htm

Women's Social Security Issues:
http://www.womensissues.about.com/newsissues/womensissues/library/weekly/aa0
42000a.htm

Social Security Privatization Article:
http://www.socialsecurity.org/women.html

More Social Security Issues:
http://www.cpr4womenandfamilies.org/ss2000.html

If you’re like many people, your retirement savings have not been growing consistently over the years. We’re not referring to the wild fluctuations in the stock market, but rather the fluctuations in our short-term needs. Every once in a while, it just seems like a good idea to yank ALL those retirement savings out and pay for something.

You might need to pay for a down payment. You might need to pay off some credit card debt that’s nagging at you. You might want to ‘bugger off to Europe’ as Rick did some years ago. You know it’s not a good idea financially, but you do it anyway. Retirement savings are not designed to bail us out when we need this kind of short-term cash infusion but if it’s there…

As financial advisors, we have our ideals. Ideally, you should put retirement funds away and ‘leave it there’. Ideally you should never touch it at all, even when you retire! Why? Because it is the ‘earnings’ from the nest egg that you should be using, never the principal. As we heard one person suggest recently, your principal is like your ‘goose’, and you never kill the goose, because then you’re eliminating all those future ‘golden eggs’ (interest/earnings) it will lay.

As financial advisors, one way we try to prevent people from yanking out their retirement savings is by ensuring there are other ‘short-term’ funds available for emergencies. These are meant to act as a buffer zone against the yankers. It helps, but it doesn’t always work.

One problem is that a distant retirement will never be more urgent than the current cash demands you have. It’s impossible. How can long-term demands be more urgent than a current crisis? So what stops you from yanking out those retirement funds? Their convictions? Simple arithmetic? A more viable alternative?

When a client is bent on yanking out their retirement savings to pay off, for example, some credit card debt, telling them how much they’re going to lose in retirement income in 25 years time doesn’t seem to work. Even telling them how much the tax bill is going to be next year can pale in comparison to the relief the person is seeking from the anxiety over their current debt crisis.

So, the question is how can we provide ‘relief’ and still keep the retirement funds intact? Look at a debt consolidation loan? Review the person’s cash flow and create a debt repayment program? Maybe this will work for a minority of people. In the real world, when people are looking for relief, however, they are looking for relief NOW!!! The easiest way is to yank to retirement funds and be done with it.

So, in the moment, when you are in a cash crunch and seemingly have no other place to go, you will yank your retirement savings. Unless you have anticipated the problem and ‘pre-decided’ that under no circumstances will you access your retirement savings. In this way, you will do a pre-emptive strike on bad financial moves. Further, you will be cognizant of putting yourself into situations where you might risk those long term savings.

The alternative is to invest long-term, make progress, encounter a short-term cash crunch, yank out your retirement funds, survive the problem, invest long-term again, make progress, encounter yet another short-term cash crunch, yank out your retirement funds to get relief…

If you’re locked into an investment cycle like this, your retirement savings have not been growing consistently over the years, and it’s not just the market.

Rick Hoogendoorn has been in the financial services business since 1991. Cheri Crause is a certified financial planner in Victoria, BC. .
www.chericrause.com
rick.hoogendoorn@shaw.ca