Why Retired Women Are at a Greater Risk for Financial Catastrophes

When planning for retirement, various challenges and hurdles can get in the way. These obstacles can often be different for men and woman, and may leave women at a greater risk for financial crisis during retirement. It is no secret that unfortunately women earn a lower salary than men in many cases. Plus, according to the recent 17th Annual Transamerica Retirement Survey, women are paying higher medical costs (approximately $600 more than men annually). This leaves less money to work with when it comes time to put funds into retirement savings.

In addition, women most often take on caregiving roles, either raising children or taking care of aging parents. This can play into a decrease in retirement savings as it can lead to fewer working years, less money to be added to a 401(k) savings account, and can lower a woman’s Social Security retirement amount. And, with the Social Security Administration data showing women are living longer than men – 86.6 vs. 84.3 years of age - and more female patients living in retirement homes and assisted living centers, women need to take action when it comes to saving properly for retirement. The recent survey also concluded that only 55 percent of women are secure in their retirement savings as compared to almost 70 percent of men. Jeanette Bajalia, a retirement income planner and author of “Retirement Done Right” and “Wise Up Women” believes women “deserve better” when it comes to retirement savings. She shares deeper insight into three areas that can cause women to fall deeper into financial disaster once retirement is upon them: Lifespan – While the average lifespan for both men and women continues to increase, in many cases women are outliving men. While living longer is obviously a plus, women have to plan for the possibility that retirement may stretch upwards of three decades. And with the average private nursing home room costing $90,000 per year (according to Debra Whitman, Chief Public Policy Officer for AARP), retirement savings needs to become a priority. Because many women are living longer, and pay more for health care, it is imperative that women take care of their health and take steps early on when a health issues arises. For women, retirement savings should take into account long-term care, preventative health care costs and also routine health care costs. Getting Divorced – Getting divorced can pull the rug out from under some women when it comes to financial security and stability. Not only can divorce be emotionally wrenching, but devastating as well on finances. Beware of mutual debt, hire a financial advisor, understand how the divorce will affect your social security benefits, and gather all financial and retirement-related documents before signing on the dotted line. Being Widowed – Going back to the reality that most women will outlive their male companion, widowhood can eventually come into play. If both you and your husband receive Social Security, understand one of those benefits checks will stop being issued. In some cases, depending on the company, pension checks your husband was receiving could be decreased or stopped altogether. Be sure you know where all investment and financial documents are stored, and review assets together regularly so you aren’t dealing with financial confusion in addition to mourning the loss of your spouse. While the idea of retirement savings and planning could seem overwhelming, the key is having a great team of advisors and supporters on your side. Find professional and experienced individuals in the area of financial planning, tax planning, estate planning and health care in order to properly prepare yourself for retirement. One of the best ways to enjoy and get the most out of retirement is to have your ducks in a row when it comes to finances, and physical and emotional wellbeing.

Can Investment Fears Put You at Risk of Dying Broke? Matt K. Logan CFP® Financial experts are seeing a direct correlation between the increasing number of Americans who die broke and today’s emotionally driven approach to savings and investing. Significant sociological dynamics throughout the years that affect baby boomers (people born between 1946 and 1950) and the Generation X population (people born between 1965 and 1984) has been recognized as a having a major influence on the relationship these individuals and their children have with money and the narrowing of stock market investments. Based on a recent study by MIT (Massachusetts Institute of Technology), Dartmouth and Harvard University economics professors; at least one in two Americans has zero financial assets or less than $10,000 when they die. And, many people surveyed revealed that the increasing frequency of calamitous events in our modern world create the uncertainties that fuel fears of putting savings into the stock market. A look at global events as these generations merged into adulthood may also help to explain some of the investment fear inducers and hindrances to saving such as: a) The economic meltdown of 2008 that initially derailed the entire financial sector of the United States before spreading to markets overseas. Large and small companies as well as people who relied heavily on credit were deeply affected.
b) The burst in the real-estate bubble delivered a direct hit to the emotional and financial security of many with new home loans or people coming close to paying off mortgage loans. Fears about losing their homes and the actual loss of housing triggered by this meltdown literally wiped-out life-savings. This also resulted in the accumulation of new debt to meet financial obligations such as relocation, car loans and health issues among others. These setbacks naturally shifted the focus from concerns about solvency in the retirement years to meeting the demand of daily living. This also curtailed rather than spurred saving and investment decisions. c) Staggering increases in educational costs pushed many parents and their college age children into debt. Federal Reserve Bank of New York economist Meta Brown reported that at least 29% of baby boomers admitted that they took out education loans and double that number of new college graduates said their education was mostly financed by student loans. The effect of this spike in student loan debt also created a significant shift in attention from savings and investment to debt reduction and survival. d) Vilification of wall-street through negative media coverage has also been attributed to creating deep-seated mistrust of the stock market and stock market investment resistance. Surveys indicate that more than 1,400 millennials reportedly consider the stock market to be “risky”. This lack of confidence has caused even those with the ability to make long term investments for their future shy away from exploring these opportunities. Also, more people saw stock market investment as a short-term financial option of five years or less rather than as a long-term investment strategy. Unfortunately, this view usually subject short term investors to higher volatility rates. Overall, the accumulation of down turns in the economy, civilian unemployment, spikes in cost of living and fears about changes in the political arena has diminished interest in stock market investments. The following debt to balance graph from the Federal Bank of New York highlight these changes that influence fears about investing in the stock market.

The bottom line is that a bent on avoiding risk leave many people dependent on meager savings, CDs and money market accounts which alone; may not be sufficient to provide sustainable long term income. As such, financial experts are concerned that the effect of fear can turn out to be disastrous for people as they age. They suggest doing a retirement evaluation to get an idea of how long it will take before you run out of money based on current savings, projected inflation and current investment strategies. Historically, stocks have been a major producer of long-term gains that provide above average financial security for investors. In fact, large stock investments have returned an average of 10% annual returns since 1926. Cumulative financial data that track investment outcomes also suggest that long term stock investments provide the best chance to survive inflation and an edge over short-term investments or low returns from savings accounts. Learn more about the benefits and potential risks of long and short term investments, annuities that are designed to pass some risks onto insurance companies, surrender periods, participation rates and annualization. A good understanding of the pros and cons of investing in the stock market may help to reduce fears and provide more options for greater financial security during the retirement years. Matt Logan is a Representative with Matt Logan Inc., and Summit Brokerage and may be reached at www.mattloganinc.com, 336-540-9700 or matt@mattloganinc.com. Matt Logan Inc is an independent firm with Securities offered through Summit Brokerage Services, Inc., Member FINRA, SIPC. Advisory services offered through Summit Financial Group Inc., a Registered Investment Advisor. Summit Brokerage Services, Inc., its affiliates and Matt Logan Inc. do not give tax or legal advice. You should consult an experienced professional regarding the tax consequences of a specific transaction. These are the views of Matt Logan Inc, and not necessarily those of Summit Brokerage Services, Inc. and any of its affiliates and should not be construed as investment advice. Sources: http://www.huffingtonpost.com/2012/08/06/americans-die-without-money_n_1746862.html https://www.quora.com/Why-are-so-many-people-afraid-to-invest-in-the-stock-market http://www.usatoday.com/story/money/personalfinance/2016/11/26/invest-save-interest-rates-retire-stocks-risk/93798458/ http://money.cnn.com/retirement/guide/investing_stocks.moneymag/index4.htm