Women and Retirement
Financial Toll of Separation/Divorce
Divorce and Debt
Women and Retirement
considering Venus and Mars, men and women are very different... so why
should their retirement needs be the same?
Did you know
that according to the National Center for Research:
- 40% of married
women are still not involved in the decision making.
- The average
age of widowhood is 56.
- 90% of all
women become solely responsible for their own financial welfare
during their lifetime.
- 71% of the
elderly are women. Of this group 48% are widowed. 80% of widows now
living in poverty were not poor before their husband died.
- Women change
jobs more frequently than men.
- Women wait
longer to start saving for retirement.
- Half as many
women as men receive pensions.
- Women ages
35-44 earn approximately 72 cents for every dollar earned by men,
while younger women now earn, on average, 84 cents for every dollar.
What does all
different and more demanding needs than men when it comes to investing
and retirement planning. A woman lives an average of 7-9 years longer
than men, so she should be prepared to outlive her husband. The average
woman retiring today at age 65 is expected to live another 25 years.
Without adequate savings, she could outlive her money. Women today
cannot expect Social Security and pension benefits alone will provide
enough money to maintain their pre-retirement living standards. The
average man retiring at age 65 collects $782 a month in Social Security
benefits, compared to only $523 for the average woman.
Also, many women
give up jobs in order to provide care for the family, and on average,
tend to change jobs more frequently. As a result, women are less likely
to be 100% vested in an employer’s pension plan. For every year a woman
stays home caring for a child or other family member, she must work 5
extra years to recover lost income, career promotion, and pension
coverage. Staying out of the work force for only seven years during a
49-year career may cut retirement benefits in half.
Based on these
facts alone, women need to save more for retirement than men. A single
woman earning $50,000 a year needs to have saved $55,000 in her
retirement account by age 35, as opposed to a man who need only to save
What does this
mean for you?
It is more
important for women to begin investing sooner than men and become as
much, if not more, informed than men. This means educating yourself in
understanding your alternatives, so that you can hire the best
professional to help meet your needs. Exceptional advisors should have
an educational process set in place that will gradually progress you to
greater and greater responsibility and involvement regarding your
investments and savings.
advisors that keep you in the dark in regards to total costs, tax
ramifications and risk should be avoided. You must feel a sense of trust
with your broker/advisor. It is necessary to talk to their existing
clients to see if they know and understand their total expenses each
year and if they have been sufficiently educated on what is going on
with their investments.
While there are
many excellent female brokers/advisors available, do not hire another
female solely because she is female. It does not always mean she will
understand your situation better, therefore, do not limit yourself in
selecting your broker/advisor. Other parts of this website will help you
avoid costly mistakes and steer you in the right direction. Feel free to
explore the rest of www.soundinvesting.org and
e-mail us with any comments or questions for future articles.
Financial Toll of
Nearly everyone knows the
emotional toll divorce can bring, but the financial toll can, many
times, be as severe. There are ways to lessen the financial impact of
divorce, please consider the following:
Keep good records -
At the first thought that your marriage may be in trouble, seek a good
attorney to explain your rights and answer questions toward your
specific situation. Be organized when you visit your attorney with a
detailed list of your assets and liabilities along with the last five
years of tax returns, brokerage statements, employee benefit statements
and any other financial documents.
Protect your credit -
Ask your attorney how to protect yourself from damaging your credit
rating by running up bills on joint accounts. Try to keep lines of
communication open with your spouse while conveying any concerns to your
attorney. All joint debt should be paid off, or factored in your
settlement. Before the divorce is final, make sure your name is off
joint property that is going to your spouse so a new mortgage does not
get you into further debt.
Consider a Mediator -
A mediator works with you and your spouses attorney to hammer out a
property settlement. Many times a mediator can save both time and cost
between the two attorneys.
Don't treat assets equally
- You must look at all aspects of property when dividing it up,
not just the total value. For example, if a spouse gets a $300,000 house
and the other spouse gets a $300,000 settlement plan then this is not an
equal property settlement. Not counting the tax ramifications of
specific property is one of the major errors in divorce settlements
today. In the example given, selling a primary residence usually does
not incur a capital-gains tax. A retirement account (with the exception
of the Roth IRA), will be fully taxed when you withdraw the money. It is
not only wise to understand the tax ramifications of each property item
but, also upkeep cost, income and growth prospects, etc. when dividing
up property. Also, keep in mind that taxes are paid on alimony payments
received (the person paying alimony gets a tax deduction), while child
support is not taxed.
Two other pieces of advice to
consider when it comes to retirement are assets and homes. First of all,
make sure your attorney analyzes your spouses retirement statement as it
is important not just to go by stated value. For example, many pension
statements do not include other retirement assets such as compensation
from the state that definitely should be a factor. You may lose many
investment advantages with a home, as they generally do not have the
flexibility, liquidity nor appreciation potential of many alternatives
within IRA assets for example. So make sure your attorney has an
excellent understanding of this because otherwise it may pay to hire an
expert in the area.
If you are getting back into the work force and were relying on your
spouse's insurance, it is a good idea to factor in the cost of insurance
in your settlement (or at least through a time period to allow you to
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DIVORCE AND DEBT
If you're dealing with divorce,
you'd better be dealing with financial planning as well. As most married
couples can tell you, there are few things that couples stress about
more than money. When a pair decides to split up, money issues take on
an even greater importance.
Tom and Cindy Divorce
When Tom and Cindy decided to end their marriage, they still had a
substantial amount of debt. There was $8,500 outstanding on their joint
credit cards, they owed $4,800 on their boat, and $48,000 on a home
equity loan they used to remodel their kitchen. At the time they split,
Tom agreed to take care of the home equity loan and the credit debt.
Cindy kept the boat so she agreed to pay for that.
Five years after the divorce, Cindy was stunned to learn that Tom had
filed for bankruptcy and she was suddenly being held accountable for the
home equity loan and the credit cards $56,500!
Tom and Cindy are an ideal reminder of why it's so important for
divorcing parties to close out all jointly held lines of credit. How do
you do that? Simple. Cancel the jointly held card, and have the party
agreeing to the payment either pay off the balance or transfer the
balance to a new, individually held card. Prior to signing a settlement,
you should put mortgages and loans in the name of the party that is
agreeing to cover the debt.
What About Your Situation?
If you're divorcing and you hold credit cards as a couple, get rid of
them. The risks for skipping this paperwork-filled step are too great;
if you don't, you can be left holding the bag for an ex-spouse. It will
feel anything but fair but the law says if the creditor can't collect
from the ex-spouse, it can collect from you. It's important to realize
that, legally, you can be held responsible, not only for the debts you
accumulated together while married, but also for debts your ex runs up
after the divorce if the credit card remains in both your names. It
doesn't matter whether your former spouse said he or she would pay those
No matter how amicable you fell your divorce will be, you really need to
talk to a good divorce lawyer so you can head off future problems. You
may be able to draft a divorce agreement together on your own, or with
the help of a mediator, but you should also have an independent
attorney, who works only for you, give it a final review to make sure
you are sufficiently protected.
What to Do Down the Road
If problems do arise later, you'll need to get a copy of your
consolidated credit report for the three major credit reporting bureaus
to verify that the debts creditors say you owe are in fact from credit
cards you and your ex had together. Make sure your former spouse didn't
somehow obtain a new line of credit under you name without your
permission. A consolidated credit report will cost a few dollars but it
will provide vital information. You can order it from Myvesta.org,
(formerly Debt Counselors of America) a non-profit, financial assistance
Debts aside, it's also a good idea to get the advice of your attorney,
your accountant, and your Financial Advisor. Dividing up assets can be a
complicated process and each of these professionals can play a key role
in a difficult situation.
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GEN X Woman
While 8 in
10 Single Gen X Women Have Some Retirement Savings...
Live "Paycheck to Paycheck"
Say It’s Important to Look Successful
- One in
Three would Rather Talk to Their Grandmother About Their Love Life
Than Talk to a Financial Advisor about Investing
management is a fundamental issue for Gen X women," Mascaskill said.
the ledger: Longer life expectancy and lower earnings than men, movement
in and out of the workforce, family responsibilities, high debt
accumulation. It all adds up to the fact that women must save early,
invest aggressively and spend less."
single women think about retirement -- and may even believe that they
are successfully saving for it -- their desire for short-term
gratification takes precedence.
example, one half of single women surveyed said that at this point in
their lives money is for spending and not saving, three out of four said
it was important to look successful and 54% said they were likely to
accumulate 30 pairs of shoes before accumulating $30,000 in retirement
percent of single Gen X women have credit card debt (compared to 35% of
single men). As measured by the median (or middle) survey response, the
typical single Gen X woman with credit card debt has an outstanding
balance of $2,300 - representing four weeks of average pre-tax income.
Partly as a
result of these spending patterns, significantly more single young women
(53%) say they live paycheck to paycheck than do single young men (42%).
said that credit card debt is a major issue for Gen X-ers single women
in particular. "Credit card debt is a 10-lb weight around the necks of
many Gen X-ers,
services providers should market saving and investing with all the savvy
and imagination with which they sell credit cards to young people."
X Women say they would save more with a little guidance and
encouragement. Two-thirds of Gen X single women not currently saving for
retirement said learning how to better manage their debts would strongly
motivate them to start saving. This is one reason soundInvesting.org was
created to help both the sophisticated, as well as novice investors with
objective educational information.
comes to saving for retirement, single women have a lengthy road ahead,
as they have the least amount saved for retirement of those surveyed.
The Typical Gen X single woman - as described by the median or middle
response - has $4,000 in retirement savings.
Encouragingly, only 17.5% of the single women surveyed say they have no
retirement assets. Of those with retirement dollars, savings accounts
are the most popular option, used by 66%, followed by company pension
plans (35%) and 401(k) or 403 (b) plans, 27%. Almost half of single
women surveyed - 48% - say they are satisfied with the amount of money
they are currently saving.
employer-sponsored retirement plans are probably the best way to engage
Gen Xers in saving and investing.
generation faces the longest and steepest climb to retirement - and no
one faces a longer or steeper climb than single women," said Richard
Thau, president of Third Millennium, the Gen X advocacy group. "These
women need to start saving soon or face harsh retirement reality decades
of us, the first real investment decision we're asked to make is whether
or not to participate in our employer-sponsored retirement plan, and, if
so, how much we'll contribute," Thau said. "With only a third of Gen
Xers participating in these plans, it's clear that too many of us are
making the wrong choices."
Interestingly, asked to rank a series of workplace benefits, a strong
employee-sponsored retirement plan was deemed the most important benefit
for 40% of single Gen X women, ahead of flexible work schedules (28%),
childcare or eldercare (14%), company stock or options (12%) or generous
vacation time (4%).
encouraging that single young women understand the importance of a
strong employer-sponsored retirement plan, for too many of them it
remains a theoretical benefit," Thau said. "I think the feelings is,
it's nice to know it's there if I ever need it."
that public and private sectors employers alike have a critical role to
play - as well as the obligation - to actively encourage and support
greater retirement plan participation by their younger employees," Thau
percent of single Gen X women surveyed said they are "not very
knowledgeable" about investing - versus 33% of single Gen X men.
Forty-four percent of single young women rate their money management
abilities at five or less on a ten-point scale.
Interestingly, single men and women begin saving at approximately the
same median age - 22 for women and 21 for men. Unfortunately, single
young women may not be investing aggressively enough. Just about the
same percent of single women (35%) believe CDs or money market funds are
the best way to create long-term financial security as cite stocks or
stock mutual funds (37%).
What you need to know financially in a divorce
Divide your personal property without the help of your lawyer or
the court. Unless domestic violence is involved, it's not
cost-effective to use lawyers or the court's time to divide your
furniture and personal belongings. By the time you've fought
about it, you could've purchased all new things!
Make an inventory of your household items, and decide what you'd
like from the list, assessing each item's priority.
it won't matter in 5 years, let it go. Are you too focused on a
few specific items that won't change your life? Maybe each item
is a symbol for something else?.and it's time to let go.
You must disclose everything you own and everything you earn.
Failure to do so could result in your case being re-opened for
fraud, and ruin your credibility.
your income varies year to year and season to season, use an
average of your income over time. Be prepared to explain why the
period of time you chose was appropriate, and be prepared to
show how you arrived at your numbers.
you don't know how much an asset is worth, find out. Using "0"
for an asset, or "not valued at this time" won't protect you
from having your case re-opened when a different value is
found—or even from a claim of fraud. Use appraisers, realtors
(for real estate), even E-Bay to value your property properly.
Keep your disclosures up to date. If your income changes, or a
stock price fluctuates, update your disclosures.
Provide documentation when possible. Receipts, cancelled checks,
and bills of sale are helpful in determining value.
your income has decreased recently, be prepared to explain and
provide proof that your explanation is correct. If your
department has abolished overtime, ask your supervisor to
provide a copy of the new policy. If your commission structure
has changed, be prepared to explain how.
Save your pay stubs, pension statements, bank statements, tax
returns, and other financial documents, and put them in
chronological order. You may be asked to verify the numbers you
put on your financial disclosure.
Check your withholding taxes and make sure they reflect your
actual tax liability. If you're over-withheld (you receive a
sizeable tax refund each year), the opposition will probably
figure that out. If you're under-withheld (you owe tax at the
end of the year) your child support or alimony may be calculated
using too high an income figure.
Make sure your budget is accurate. Use your check book register
and keep track of your day-to-day expenses for at least 2 weeks,
and make sure that your financial disclosure accurately reflects
your lifestyle. You can only ask for what you need if you know
what you spend.
Don't attempt to liquidate accounts or you risk violating a
court order. Most courts have automatic orders limiting your
expenditures during a divorce to "ordinary and necessary living
expenses". If you spend more than usual, be prepared to explain