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Financial Planning Needs for Women

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Financial Planning Needs of Women. 2011 New Mexico Conference on Aging http://www.nmaging.state.nm.us/CoA/CoARoundTables.pdf

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Financial Planning Needs for Women

  1. 1. Financial Planning Needs for Women Fahzy Abdul-Rahman, Ph.D., M.P.H. New Mexico State University For New Mexico Conference on Aging 2011
  2. 2. Outline New Normal Retirement Need for Women Financial and Retirement Planning What to Do?
  3. 3. New NormalEconomic conditions
  4. 4. NewEconomic Reality?
  5. 5. Characteristics of the “New Normal”An extended period of:-• Slow U.S. economic growth: GDP growth < 2%• Low single-digit average annual stock returns• Stubbornly high unemployment levels: 9.1% • Precarious job security (public and private sector) • Youth, <25: 24% • College debt --- Next financial crisis wave• Tightened credit standards• Declining asset values (e.g., housing)• Increased precautionary household savings and debt repayment• Decreased household spending
  6. 6. Retirement Need for Women Personal Finance Foundation
  7. 7. Women: Demographics• Life expectancies (2005): Men (75.2 years) and women (80.4)  For couples of the same age, this means that women are expected to spend their last five years being a widow.  husbands are still almost ½ year more educated and  about 2 ½ years older than their wives.  Impact of the health care costs• Widower among men (4%) vs. widows among women (12%)  Homeownership: 81% of widows vs. 67.8% nationally• Average marriage span of 8 years  single working mother issues: custody, childcare, and debt issues
  8. 8. Women Earn less: 77.8 cents for every dollar men earn Less likely to have retirement plan:  Tend to work in part-time jobs or for employers that don’t offer retirement benefits  Fewer have defined-benefit pension plans.  And those with plans have smaller pensions because of less time in the workforce.  Women are also less likely to participate in 401(k) plans because of lower compensation.
  9. 9. Women More likely to take career breaks / provide for others before themselves  Children  Elderly parents (in laws) Lower potential earnings over lifetime  Due to above:  Lower wage, more familial responsibilities,  11 years out of the workforce due to childbirth and care giving to children and frail elderly (Brennan, & O’Neill, 2004).
  10. 10. Women Women have lower Social Security benefits  Lower income and less time in the workforce also means lower Social Security income  In 2007  unmarried elderly (age 65+) woman, SS comprises 48% of their total income  unmarried elderly men : 37% and  elderly couples: only 30% Fared worse in financial planning knowledge  Performed worse than men in financial literacy questions on compound interest, inflation, and especially stock risk diversification (Lusardi and Mitchell, 2008).
  11. 11. Women: Eventually, … As pointed out by Brennan and O’Neill (2004), as high as 90% of women will need to be in charge of their financial management at some point in their lives.
  12. 12. Financial and Retirement Planning The Basics
  13. 13. Personal Finance Basics Delayed Gratification  Marshmallow Experiment (1960s) Wants vs. Needs  Buy only what you heed  Do you know which one is wants vs. needs?  New normal needs for new normal economy Personal Finance Planning
  14. 14. The Five-StepFinancial PlanningProcess
  15. 15. Smart Goals SMART Goals Specific…….. “Pay for lodging, transportation, meals for a 5-day trip to Washington, D.C.” Measurable… “$300 through fundraising,a$50 from birthday money, save $25 week.” Attainable….. “If I stick to my plan, I’ll have the money when I need it.” Realistic……. “I still havework toward this to live on while I enough money goal.” Time-Limited.. “I need to have all the money by 6 months from now.”
  16. 16. What to Do? React
  17. 17. What To Do?1. Make retirement plans a priority when you consider a job2. Work as long as you can at the highest salary you can3. Understand the effect on Social Security benefits of divorce and remarriage4. Put money away for retirement on a regular basis5. Learn about your finances
  18. 18. All Bad for Women? More likely to seek the advice of financial planners
  19. 19. Resources & Financial Advice Own research Hire professionals  Certified Financial Planner® (CFP®)  Chartered Financial Analyst (CFA®)  Certified Fund Specialist (CFS)  Chartered Financial Consultant (ChFC)  Certified Investment Management Analyst (CIMA)  Certified Public Accountant and Personal Financial Specialist (CPA and PFS) Selecting Investment Professionals (FINRA)
  20. 20. Financial Planning Needs for Women Fahzy Abdul-Rahman, Ph.D., M.P.H. New Mexico State University For New Mexico Conference on Aging 2011