With longer life spans, women shouldn’t wait to do financial planning

Credit: Alyssa Pointer/Alyssa.Pointer@aj

Credit: Alyssa Pointer/Alyssa.Pointer@aj

Atlanta resident Chiquita Dent was 23 years into marriage, with a near-perfect joint retirement portfolio shared with her husband. Then the couple’s relationship crumbled and divorce followed.

Dent, now 51, discovered she would need to regroup so that she could manage her money to ensure that her retirement years would be stable as a newly single woman and mother of a 16-year-old son.

She is not alone. While American women tend to outlive men, they are less prepared for retirement than their male counterparts.

“This was my mom’s story 27 years ago when my dad died and she was 69,” said Charlene Holland. “She didn’t know what they had because she was never involved in financial matters. When he died, my mom lost her financial anchor and this was after he promised her that she would be fine financially for the rest of her life. This was not the case. His death was like a tornado that struck and devastated everything in its path.”

Holland, a certified financial planner who plans to launch her own practice, shared that within the past decade, she has witnessed that same scenario “being played out in the lives of much younger women — women who were educated, and many who had careers but had left them to raise their family.”

Women, as shown by a study from the National Institute on Retirement Security, face unique challenges in saving. This stems largely in part from a gender pay gap that “persists into a retirement wealth gap,” according to the May 2020 report, “Still Shortchanged: An Update on Women’s Retirement Preparedness.”

The report showed that older women receive approximately 80% of the retirement income that older men receive — nearly identical to the gender pay gap for American women. It also found that women age 65 and older had a median household retirement income of $47,244 or about 83% of the median household income, $57,144, for men, and that women earned less than men over the course of their careers.

“Not only do women outlive men, they also typically earn less for similar roles, and often spend time out of the workforce if they’re having children,” said Russ Thornton, founder of Wealthcare for Women, which focuses on retirement planning for women 55 and older and their families.

Credit: Submitted

Credit: Submitted

In addition to an earning gap, some financial planners find another factor to be a reason for a lag in retirement savings by women: procrastination. “The light bulb doesn’t seem to go off until the mid-40s in some cases,” said Terrell Dinkins, president and founder of OBN Wealth Advisors, an independent registered investment adviser firm. “Then they realize that it will take too much money monthly to accumulate what they want as a desired retirement income. Catch-up investing is possible, but the sacrifice is far greater,” added Dinkins, the author of “One Bucket at a Time: A Woman’s Guide to Creating Wealth.”

The light bulb for 54-year-old Kim McNair, the owner of an event management company, has been going off more frequently in recent years. “Now that I’m more mature,” said McNair, “I’m like ‘what am I going to do.’ My concern is really how much time do I really have.”

Credit: Family photo

Credit: Family photo

The McDonough mother of five adult children added that her concerns have grown since the coronavirus pandemic. McNair, who married at 19 and divorced about six years later, also said she’s come to realize she’ll have to be aggressive going forward. That includes hiring a financial adviser and starting to invest her money.

For Dent, who says she has “a more diversified portfolio,” investing has been a viable option. “Once I got a financial adviser, I started to invest a portion of my money into unit investment trusts and mutual funds,” said Dent, an entrepreneur who, through her company, The eX Factor, provides marketing and personal brand development transformation services for professional divorced women. “I also learned about annuities and invested some of my money there as well.” she said.

Still, professionals warn against attempts to “catch up by taking unnecessary risks, which could do more damage than good,” said Thornton. Dinkins has seen her share of clients who look for “get-rich-quick” possibilities. She recounts a meeting with an older woman about her finances. “At the age of 60, her job position was eliminated. She had only saved $50,000, and she still had a mortgage. She was hoping I could invest the money for six months and create a miracle for her. Needless to say, she didn’t become a client, and, at the age of 60, she was looking for a job.”

Dent wanted to be diligent about avoiding a similar situation. “In the early stages after my divorce, I was very concerned about how I would manage on my own financially,” she said. “After doing a full assessment of my finances and working with a competent financial adviser, I gained much more confidence about my financial situation. I now feel that I have a good handle on my current financial picture and I am managing my resources well to cover my monthly expenses, save in diversified ways and live the life” to which she’d “become accustomed.”

Living the life is possible, from what Dinkins has found with some of her clients. “The picture is quite different for those who have prepared for retirement,” she said. “They are planning trips and taking vacations with their grandchildren.”

Credit: Contributed

Credit: Contributed

Retiree Lynne MacLean gets to do her share of traveling now too. After 38 years with Sandy Springs-based UPS, the Roswell resident retired in 2015. She credits Thornton, her financial planner of roughly 20 years, with helping her develop healthy financial habits, to see that she could and should travel and “spend some money” instead of leaving it “to other people.” The 62-year-old who never married believes in playing it safe, though, and not taking risks with her investments. “Even though I was hesitant to retire at the time, I think it’s been very good.”

She said she has an IRA, savings account, 401(k), company pension, and, at the advice of Thornton — over the uncertainty of the future of Social Security — has taken her Social Security payments instead of waiting until she turned 66, the age at which she’d originally planned to start taking the payments. “I would never have done that without him,” said MacLean, who, since retirement, has managed to take both guitar and French lessons.

MacLean suggests getting an early start, age-wise, when it comes to investing. For Dent, that means also taking “greater risks the younger you are. This is the time to grow your funds by being more aggressive with your investments. As you begin to get older, scale back your aggressive investments and find a way to protect your gains so that you have a great nest egg for when you reach retirement age. It happens quicker than you would expect.”

Credit: Contributed

Credit: Contributed

Dent also has some ideas about why women tend to outlive their husbands, and advice regarding retirement planning.

” ... Oftentimes we are more intentional about taking care of ourselves through proper diet and exercise. We know that so many people rely on us that that becomes the priority. To the contrary, when it comes to money, we often turn that over to our husbands to manage. They either don’t have the knowledge and skills to make wise investment decisions that will pay off long term or they don’t see the value in saving for retirement,“ she said.

For divorced women like herself, being financially unprepared can be even more dire, Dent said. ”We do not understand the importance of making sure that we get our fair share of the ex-husband’s 401(k) or stock portfolio.”

As Dinkins sees it, “women are born with a blessing and a curse. The blessing is we will probably outlive our male counterparts, and the curse is we will probably outlive our male counterparts. Longevity is the blessing and the curse. The goal should be that your money outlasts you or meets you at your resting place. Start investing young. A young investor has to work less at preparing for the future than a procrastinator.”

Financial tips for women

  • Determine your financial starting point, no matter your age.
  • Figure out what you want your life to look like in the future, including retirement.
  • Research and take advantage of all employee-related financial investment and retirement options, including 401(k) and pensions. Also research Social Security income, as it may be a considerable portion of your retirement income.
  • Make sure you’re aware of your spouse’s 401(k) or stock portfolio, as well as your joint assets.
  • Work with a financial professional, when necessary, to develop and execute a retirement plan.

Sources: Russ Thornton and Terrell Dinkins, financial professionals