Money Mastery Women Risk Impoverishment In Golden Years By Not Taking An Active Role In Financial Planning

Jane is 45, divorced and recently returned to the outside work force after raising two children. She has a modest savings account and even a few CDs. She’s considered joining a women’s investment club, but the stock market scares her. She spends much more than she saves but plans on getting control of her spending eventually. Given the longevity in her family, she is occasionally overwhelmed at the prospect of old age and how she will live it comfortably.

But most of the time, the demands of today keep her from thinking too much about tomorrow. Besides, she thinks, everything will probably turn out just fine.

Jane is a statistic, and the statistics are grim: if women today between the ages of 35 and 55 don’t start preparing immediately for their financial future, up to two-thirds of them will spend their golden years impoverished.

“There is going to be, without question, a tsunami wave of single, midlife women entering retirement who will be utterly unprepared for the economic reality of their later years,” says Christopher Hayes, author of “Money Makeovers: How Women Can Control Their Financial Destiny” (Doubleday - January 1998).

Hayes is the founder and executive director of the National Center for Women and Retirement Research (NCWRR), a non-profit research, education and training center that has conducted nine major studies on women and money.

In addition, as a professor of psychology and chairman of the Graduate Program in Gerontology at Long Island University’s Southhampton College, Hayes has just completed the second year of a three-year study researching the financial reality of Baby Boomers. It’s a disturbing profile.

“Financially, the most at-risk group of women are single and divorced who have the expectation that Social Security will be their primary source of income,” says Hayes.

“Because of current divorce rates and the fact that midlife divorce rates have tripled over the last decade, we are going to see this wave of Baby Boomer females enveloping the entitlement programs in our country. These women will have to work well into their 70s to meet their economic needs. The most frightening thing is that no one wants to talk about it.”

Hayes says part of the reason that women and money is a taboo subject stems from a “long, long history of cultural gender stereotypes that are very difficult to eradicate.” This stereotyping, says Hayes, often begins in the home and is supported in the educational system.

“You cannot separate the issues related to women and money from the issues surrounding female development,” says Hayes. “If adult women are to manage their lives and thrive during their later years, making secure decisions that will affect their future finances, they need to draw on or to develop the strengths that are never snuffed out in boys.”

These strengths, according to The Women’s Cents study, conducted by the NCWRR, are risk tolerance, flexibility, optimism for the future, an affinity for math and science, and a sense of control. These qualities are common in preadolescent girls. But something happens during adolescence.

“The challenge and inherent insecurity of going from girl to teen to woman silences that once-strong voice,” says Hayes. “Their skills, strong voices and ‘can do’ attitudes are undermined by society’s message to be popular, be attractive to boys, be thin, quiet and nice.”

In terms of personal power, “girls are often failed by both the educational system and by their families.” But not always.

“I was raised by men and women business owners,” says Victoria Redlin, a Spokane attorney and counselor. “Both of my parents took an active role in helping me to understand finances. We were always comfortable talking about money.

“My dad got me started in investing, and we still invest and research stock together. He was my mentor. I would suspect that in many families where the dads have run the finances, the father didn’t teach his daughters about money.”

Hayes’ research supports Redlin’s theory. And 40 percent of the women surveyed in the NCWRR’s Life-Ties study say that their fathers continue to be a strong influence, both negative and positive, on their lives as adults.

“Today’s fathers can help their daughters with money by encouraging a belief in self; by discouraging stereotypical roles; by demonstrating equality of the sexes; by encouraging risk-taking; and by recognizing that security can be achieved in many different ways - not only by nurturing others,” Hayes writes.

Good advice. But what about adult women who never received those messages and are now facing economic uncertainty?

“It’s never too late,” says Hayes. “The most important thing is to break up the sense of complacency that comes from women’s misguided belief that someone else is going to take care of them.”

It is a belief too commonly held by women across the board - single, happily married, unhappily married and divorced. Also, says Hayes, “women need to look at their own career aspirations and be decisive. If their employer offers a 401(k) plan, they need to be making the maximum contribution to it. If they are self-employed or raising children, they have to develop an alternative IRA plan and contribute to it monthly. And learning to be a risk-tolerant investor is critical.”

Some soul searching may also be in order.

“Millions of women feel trapped in their marriages, many for economic reasons,” says Hayes. “They need to evaluate clearly what is going on in the relationship and become proactive in understanding financial matters. The one thing I would say to women who feel trapped is at some point they are going to make it and be able to leave. But typically, especially for older women, they are going to have to fall back on what they have achieved while they are still in the relationship.”

One method of achieving financial confidence is through joining a women’s investment club. In the past 10 years these clubs have cropped up all over the country. Redlin, who had been investing on her own for years, wanted to learn more about the stock market and she wanted to do it “in the company of women.”

“Women feel more secure in a women-only group,” says Redlin. “Women working together feel safer asking so-called dumb questions. And the learning curve is straight up.”

In October 1996 she organized a group of friends and founded H.R. Investments. The group currently owns five stocks. Redlin attributes her group’s success to its members’ commitment to continuing education and the willingness of each member to participate fully in the process.

Typically, investment groups meet monthly. During the meeting, one or more stocks are presented for the group’s evaluation. Members rotate the presentation responsibilities. The decision to purchase or pass on a stock is made by the group, whose members then follow the stock’s progress. Group goals are long term, with successful groups focusing more on the educational aspects than attempting to make big bucks in the market.

“Female investment clubs provide key things that can’t be duplicated anyplace else,” says Hayes.

“They provide a forum for women to get support from other women in order to make important financial decisions. They provide women with financial mentors and they provide them with a vehicle to develop a tolerance for risk.”

Joining a group is an important first step in becoming financially proactive. But getting beyond the group, in Hayes’ opinion, is the critical passage for women.

“If there is a downside to investment clubs, it is that they perpetuate the idea of women having to ask permission from others to be able to make a decision,” says Hayes. “The groups don’t solve the problem of dependency; they just move it from one area to another.”

The other problem, says Hayes, is that often members don’t make much money.

“When you take a large amount of money and dilute it by the number of members in the group, you not only don’t make a lot of money but, again, you don’t nurture the kinds of qualities that an investor needs to nurture in order to make good financial decisions.”

“Although investment clubs are supposed to be the greatest thing since sliced bread, ultimately they don’t allow women to become risk-takers to the degree that it will allow them to generate wealth.

“Once a woman becomes comfortable with the basic idea of investing, she needs to move on from the group. She has to trust in her own abilities.” Ten months, in Hayes’s opinion, is a reasonable amount of time to spend in a club.

All of the original members of Redlin’s club are still together. Redlin sees the group as a “long-term relationship” but agrees that investment clubs are only a launching pad for bigger things.

“Essentially, the group is a learning tool. Lots of the members take information presented in the group and then turn around and invest on their own.”

It’s that ability to act independently that may protect many women from becoming the next elderly poor.

“The odds are that you’re going to be alone,” says Redlin. “Don’t put your eggs in the market of someone taking care of you. Put them in the stock market instead.”

MEMO: Two sidebars appeared with the story: 1. INVESTMENT RESOURCES FOR WOMEN For more information on this subject, check out these resources:

Books: “Money Makeovers: How Women Can Control their Financial Destiny,” Christopher Hayes, January 1998 “The Beardstown Ladies Common Sense Investment Guide,” Leslie Whitaker, 1995 “The Beardstown Ladies Guide to Smart Spending for Big Savings,” Robin Dellabough, 1997 “Starting and Running a Profitable Investment Club: The Official Guide from the National Association of Investment Clubs,” Thomas E. O’Hara 1996 Newsletters: Northwest Investor. Published monthly. 1 year subscription $125. 1-800-622-7474 Marples Business Newsletter. Published biweekly. 1 year subscription, $72. 1-206-281-9609

Associations: National Association of Investors Corporation. 1-248-583-NAIC (6242)

Seminars, research and publications information: National Center for Women and Retirement Research. 1-800-426-7386

2. GETTING STARTED Knowing where you stand today is critical to planning your financial future. The following are tips to help you get started:

Assets First, determine your net worth. Draw up a list of everything you own that has a ready cash value. These are you assets. This list should include: Checking and savings accounts Certificates of deposit (CDs) Money market funds Mutual funds Stocks and bonds Employee stock plan Profit-sharing plan Life insurance, cash value Retirement accounts: IRA, Keogh, 401(k), vested pension Home Any other real estate Collectibles Money owed to you

Liabilities Next, determine what you owe. These are your liabilities. The list should include: Mortgage Loans: home equity, car, student Charge cards Taxes: income and real estate

Net worth Take the total figure from your assets column and subtract the total figure from your liabilities column. The figure will give you your approximate net worth.

Taking action The goal is to keep your assets greater than your liabilities. If your liabilities are greater than your assets, you need to pay off your debt and get spending under control. Some ways to achieve this are: Meet with a financial or consumer credit counselor. Set up a payment schedule for all bills. Be determined to clean up your credit history. Set up a family budget and stick to it. Consolidate debt under one bank loan. Cut up all or most of your credit cards Examine your lifestyle to find ways of scaling back. Pay yourself first. Put savings at the top of your monthly expenses; 8-12 percent of your monthly income should be your goal. But wherever you start from, start saving now. (Source: Money Makeovers)