When it comes to investing, many women are forced to do more with less. Faced with student loans and with an eye toward owning a new car or a first home, its not surprising that many 20-something women think saving for “old age” can wait for just that – an older age. But because of their longer life span, women have an even greater need than men to make the most of their retirement dollars. Any woman who wants to secure her future should begin today by taking time to consider investments and retirement planning.
The single smartest thing a woman can do is to begin saving earlier and investing more aggressively. One recent survey showed that only 46 percent of women between the ages of 46 and 64 had started saving for retirement before they turned 40, compared to 67 percent of men.
When women do invest, statistics show they tend to favor less aggressive investment vehicles, such as money market funds or income funds over more aggressive vehicles, like growth/stock funds or growth-and-income funds. In a Yankelovich survey conducted in 1997, approximately 75 percent of the women surveyed said they always favor safe investments, even if it means getting a lower return. In another recent study, only 26 percent of the women polled said they were willing to take substantial risks to earn substantial gains, compared with 45 percent of the men. As financial experts in Business Week magazine (December 13, 1999) explain, men’s investment strategies generally aim to grow their principal, while women invest to protect it. As a result, women’s portfolios are often too conservative. Thus, women would be wise to review their asset allocation.
Historically, the financial services industry has been slow to view women as viable customers, preferring to target the traditional male investor. But this mindset is changing, with more companies recognizing the role women play in making financial decisions that affect the household. It is estimated that about 80 percent of women now control their family’s budget. However, even in those households where women are responsible for paying the bills, men handle most of the investing.
Even today, there are women who still equate “marrying well” with “planning for the future”. However, that situation can change quickly through divorce or death, taking the “profitable” marriage away. Experts estimate that about two-thirds of all women will at some point in their lives be wholly responsible for their finances.
Statistics bear witness to the need for women to take an active role in investing. A look at current figures shows women tend to live, on average, seven years longer than men. Women represent almost three-quarters of those over age 65 who live below the poverty level, which is all the more reason to take an active role in investing and to start saving for sufficient retirement funds.
Clearly, women would do well to start early and save often. The earlier a savings plan is established, the less money is needed overall, because the funds have more time to grow. Life insurance can be an extremely beneficial tool for women of any age. Women who do not qualify for company-sponsored plans due to career interruptions or short tenure with an employer, would do well to explore this option. In addition to providing benefits to survivors, the insured can sometimes borrow against a policy to realize dreams such as paying for a child’s education or starting a business.
Before taking any steps, talk to a professional about the pros and cons of such actions. For both women and men, it pays to create a clear vision of one’s financial future, both in terms of a better-focused, less stressful today and a comfortable, more prosperous tomorrow.