Published July 2002

Retirement hurdles: how to clear them
Research finds women face greater challenges than men in saving for future,
but it can be done with planning

By Kimberly Hilden
Herald Business Journal Assistant Editor

When it comes to investing for retirement, it’s a time of promise and peril for women, said Maryann Dorman, a Personal Financial Analyst with Primerica, a Citigroup member.

During her presentation on “Building Investments” at the Women on the Move conference last May in Everett, Dorman said women were “positioned for success” in the economy, with a growing number controlling assets and running businesses.

“The Securities Industry Association estimates that some 220,000 women now head households with income of more than $100,000, and that number is expected to double by 2010, when they’ll control more than $1 trillion in assets,” she said.

There are now more than 9 million female-owned businesses in the United States generating more than $2.3 trillion in annual revenue, Dorman said, and by 2005, half of all businesses will be female-owned.

“This is good news, but, as our financial success continues to grow, so do our financial responsibilities,” she said. “Unfortunately, meeting these financial responsibilities can be a far greater challenge for women than for men.”

Why? A number of factors — from less pay to more time spent away from the work force to raise a family — contribute to less retirement income from Social Security, retirement plans and personal savings, Dorman said.

A new report issued by the Women’s Institute for a Secure Retirement agrees.

In May, the Washington, D.C.-based nonprofit released “Your Future Paycheck: What Women Need to Know About Pay, Social Security, Pensions, Savings and Investments,” which detailed the hurdles women face when it comes to building a secure retirement, including:

Decreased earnings opportunities:

• For every dollar a man earns, a woman earns 73 cents.
• Half of all full-time working women earn less than $27,355, compared to $37,339 for men.
• More women work part-time in female-dominated occupations that pay less and do not offer benefits.
• Women lose $659,139 in earnings as a result of care-giving during their lifetime.

Pension differences:

• A total of 45.5 percent of working women participate in pension plans compared to 54.5 percent of men.
• Only one in five women received income from private pensions in 2000.
• For women who did receive income from private pensions or annuities, their median benefit was $4,164, compared to $7,768 for men.

Plus, 53 percent of young, single women live paycheck-to-paycheck, compared to 42 percent of young, single men, according to the report, with women ages 21 to 34 more likely to carry credit card debt than men, 47 percent to 35 percent, respectively.

“Believing they don’t have enough money to save, single, 20-something women often spend more than they save, even postponing saving until their late 30s to early 40s,” Dorman said.

Add to that the fact that women live seven years longer than men on average, and the risk of being poor in old age is 70 percent higher for a woman than for a man, she said.

“We have less money and more time,” she said.

What can be done to prevent a woman from entering the ranks of the elderly poor?

It’s critical for women to have a plan, Dorman said.

Start with a financial-needs analysis, a road map of sorts that tracks where you are now financially and where you want to go — so you can figure out how to get there. It’s a new tool that has become very popular in the investment industry, and just about every financial adviser offers it in some form, Dorman said.

Investment needs will vary from person to person, she said. For example, a younger woman looking to retire in 25 years may require a different investment strategy than a woman in her mid-40s with a child set to go off to college.

“A lot of times, you’re on the right track — and that’s also good news,” Dorman said. “It’s all about taking control, what you can do now.”

That “taking control” is a step-by-step process of education, understanding, strategy and implementation that begins with a financial-needs analysis.

Once you know where you’re going, help yourself get there by paying yourself first, Dorman said, referring to a concept popularized by Robert Kiyosaki, author of “Rich Dad, Poor Dad” and “Retire Young, Retire Rich.”

The concept, Dorman said, works like this:

If you pay yourself first — such as putting money toward your retirement investments — and run out of money to pay your other bills, you will work harder to get those other bills paid. There is incentive to do so: keeping out of debt, preventing bad credit, etc. But if you pay all of the other bills first and run out of money to pay yourself, you won’t save.

Next, eliminate debt.

“If you had no debt, would you be able to save a little more? A lot more?” Dorman asked the attendees at her workshop, a number of them nodding their heads.

Then, protect yourself and your dependents — that means life insurance, she said.

“Yes, you’re going to build a good financial house. The foundation is life insurance,” Dorman said. “You get the walls — you eliminate debt. You get the roof — you have retirement, but (without life insurance) you have no foundation.

“What happens if you die and your income goes? Or if (your spouse) dies? You need to make sure you have the right amount of coverage,” she said.

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