Why Women Are Poor in Retirement

This post by WISER president Cindy Hounsell was featured on the National Council for Research on Women's blog, "The Real Deal," in honor of Blog Action Day-08: Poverty.

WHY WOMEN ARE POOR IN RETIREMENT
By Cindy Hounsell President of the Women’s Institute for a Secure Retirement

As the candidates get ready for their debate tonight, there are a few things I would like to tell them.

First, Social Security is intended to replace approximately 40 percent of an average earner’s wages, but many women rely on it as their primary or only source of retirement income. This is one of the major reasons why so many women are poor or near poor.

Second, in theory, women should be saving more money than men because they live longer and will need money to support themselves for about three to four more years than men on average and pay for higher expenses for health care and prescription drugs. Yet, in reality they are not able to save the vast amounts that are needed. As a result, millions of women are vulnerable to outliving their assets and facing the real possibility of poverty.

My hope is that public policymakers will adopt changes to prevent poverty in old age such as providing caregiver credits, improving and expanding the saver’s tax credit, developing a better system of financing and providing long-term care and considering the needs of older women who spend much of their income on health related expenses. In the meantime, women need to make the most of the existing system and make the best financial decisions toward securing their futures.

Some basic and troublesome facts about women and retirement security—information the candidates need to hear:
Earnings
• Two-thirds of working women earn less than $30,000 a year.
• Nearly half of all women work in low-paying jobs without retirement plans or 401 (k)s.
• Women earn on average 78 cents for every dollar earned by men.
• Working women pay a steep price for unequal pay. The typical 25 year old woman with a college degree in 1984, who is now in her mid 40s, has lost a total of $440,743 in wages over her lifetime.
• Median earnings of full-time women workers in 2007 were $31,928 compared to $39,832 for men. The gap for minority women is even larger: median earnings for African American women in 2007 were $26,988; for Latino women, earnings were $22,880.

Work Status
• Women are more likely than men to work part-time. Part-time employment is associated with lower wages and fewer opportunities for retirement benefits.
• Over a lifetime, women will spend 27 years in the workforce, compared to almost 40 years for men.

Life Expectancy
• Today, an average woman’s life expectancy at birth is 80.4 years, compared to 75.2 years for men. If a woman lives to age 65, she can expect to live until the age of 85 ― about three years longer than a 65-year-old man.

Marital Status
• Between the ages 75–84, only 34 percent of women are married with their spouse present. For women aged 85 and older, only 13 percent are married with their spouse present. In contrast, 70 percent of men aged 75–84 and 56 percent aged 85 and older are married with a spouse present.
• With the death of a spouse, women often experience a steep drop in income. When a widow loses a spouse she also stands to lose a significant amount of income from her spouse’s pension and even from Social Security.
• Many widows face poverty for the first time in their lives.

Retirement Income
• The median income for retired women is $13,764 compared to men’s income of $23,322 or 59 percent of what retired men are receiving.
• The poverty rate for women age 65 and over is 12 percent. Single women in this age group are at much higher risk of poverty. Over 20 percent of single white women are living in poverty; the rate is double for single African American and Hispanic women.

In light of these facts, any national discussion about cutbacks in the Social Security and Medicare programs should not just be focused on reducing the deficit but balanced with the actual delivery of income and benefits and the implications on the lives of older women. Women traditionally spend their money on taking care of their families throughout their working lives.

Let’s hope our candidates and policymakers remember this as they create our future policies.

For more information on NCRW, check out their Real Deal blog .

The Importance of Professional and Financial Independence for Young Women

According to Linda Lewis Griffith, marriage and family therapist, young women are faced with a barrage of decisions between the ages of 18 and 24, ranging from those that are career-related to those that are financially-related. To complicate matters, these life events generally coincide with the advent of serious romantic relations, marriage and child rearing. Although these matters of the heart can certainly be thrilling, they can also prove distracting.

During her time as a therapist, Griffith has dealt with “many well-intentioned females [who] have curtailed their plans and futures when a man came into their lives.” The fog of romance may cause women to drastically alter their goals for their careers and education. According to Griffith, in some cases, their “lives go terribly awry when Mr. Right turns out to be oh-so-wrong.” When relationships fizzle, these women may be left unemployed or without financial prospects.

The recent Sex and the City movie touted female financial independence through the powerful and self-sufficient characters of Samantha Jones and Miranda Hobbs. However, financial help for women who suddenly find themselves boyfriendless and jobless would appear fairly bleak if the best resource for advice was through the silver screen. Janet Hanson felt the same way when she decided to create 85 broads, a “network of trailblazing, visionary women who aspire to use their talent and leadership savvy to affect professional, educational, economic, and cultural change for all women globally.”

Hanson was gainfully employed at Goldman and Sachs on Wall Street as the firm’s first female sales manager and, subsequently, vice president. Deciding to take on the position of take-home mom, Hanson quit after 14 years at the firm and found herself in a “horrible sense of disconnection.” She decided to establish a network for women, utilizing the mantra that “The only way to shatter the so-called glass ceiling is to stand on each other’s shoulders.”

85 broads is composed of women who “are passionate about using their intellectual capital to effect change globally.” Although the network was originally made up of current and former Goldman Sachs women professionals, it is now open to women students and alumnae of American universities. 85 broads has implemented mentoring initiatives with these campuses to provide young women with financial and career advice.

If you are a young woman juggling the demands of both career/financial decisions and domestic concerns , remember that there is such a thing as a work/life balance. Don't forget your own goals or dreams, and find ways to protect yourself financially if you are sharing a financial life with a partner. Visit the WISER website to find fact sheets that can offer you insight on managing your financial responsibilities in a way that will allow you to avoid depending on your partner. To learn more about 85 broads, you can visit www.85broads.com

What's Ahead: WISER Celebrates National Family Caregivers Month!

The Women’s Institute for a Secure Retirement, along with numerous national organizations, major corporations and community-based groups around the country, will celebrate National Family Caregivers Month (NFC Month) in November to thank and support our nation’s family caregivers.

According to the National Family Caregivers Association (NFCA), in any given year over 50 million people provide some level of caregiving services. Those services are valued at more than $306 billion dollars a year. Family caregivers provide more than 80% of all home care services. Of today’s family caregivers, 40% provide some level of nursing support. American businesses can lose as much as $34 billion each year due to employees’ need to care for loved ones 50 years of age or older.

WISER works to provide low and moderate income women (aged 18 to 65) with basic financial information aimed at helping them take financial control over their lives. Millions of women face difficult decisions every day while juggling jobs and caregiving responsibilities: 61% of family caregivers are women. WISER’s commitment to supporting family caregivers led to the publication of “Financial Steps for Caregivers: What You Need to Know About Money and Retirement,” a retirement and financial planning guide developed to specifically address the needs of family caregivers.

NFC Month is organized each year by the National Family Caregivers Association, a grass roots organization whose mission is to improve the overall quality of life of family caregivers and their loved ones. "This year we are encouraging people to speak up during NFC month." said Suzanne Mintz, NFCA president and co-founder. "One of the most important attributes on being an advocate for your loved one is the willingness and the ability to speak up and keep your eye on the ultimate goal: protecting not only the health and safety of your loved ones by for yourself as well."

To learn more about WISER or NFC Month, contact WISER at info@wiserwomen.org or visit our website at www.wiserwomen.org. Call NFCA at (800) 896-3650 or visit www.thefamilycaregiver.org.

Student Loan Management: The Freshman $15,000 +

College students can agree on a number of negative aspects of university life. Students may complain about the inordinate amount of school work they face, threatening the time usually devoted to such crucial activities as playing video games, going out and facebook “research.” Other top concerns may include the pesky weight gain associated with 2 am pizza runs and the crippling inability to do one’s own laundry.

These concerns, however, appear insignificant when compared to more serious financial issues that attending college may raise. In a time when tuition rates have risen 35% in the past five years, many students and their families find that they have drained their college savings (if they had any to begin with) and must rely on seeking an alternative method of payment: the student loan.

According to the 2003-2004 National Postsecondary Student Aid Study (NPSAS), two thirds of 4-year undergraduate students will graduate with some debt with an average of $19, 237. If one decides to attend graduate or professional school, the additional debt can range between $27,000 to $114,000. For a recent graduate entering the workforce, the payments on such balances can seem daunting.

Fortunately, there are some ways to ensure that you are choosing the smartest route when financing your education. The following tips can help you become more knowledgeable about student loans and best practices:

1) Fill out the FAFSA: The Free Application for Federal Student Aid Form (FAFSA), is instrumental in figuring out whether you and your family qualify for financial assistance. Using financial information regarding a student and his/her family, this document determines the expected contribution of a family and whether or not they qualify for federal assistance. Many colleges also use the FAFSA to determine any non-federal aid they may award a student.

2) Opt for Federal first: Acquiring federal loans may be your best bet loan-wise. Interest rates do not change and are not affected by your credit score. They also come with guaranteed borrower protections that can assist you during unemployment or financial strife. With Perkins and Subsidized Stafford loans, the governments pays your interest while you’re in school. Perkins loans offer interest rates at 5% (fixed) and Subsidized Stafford loans offer interest rates at no more than 6.8%. Unsubsidized Stafford loans are another option that do not cover your interest while you attend school, but do retain federal borrower protections and a fixed rate of no more than 6.8%.

3) Shop around for private lenders: If your family’s contribution and any federal aid fail to make the cut when paying for tuition, you may have to use private loans to cover the rest of the cost. According to Lynnette Khalfani, personal finance expert, it is imperative for students and their families to search for lenders that offer few or no loan origination fees and lower interest rates. To assist you in this process, you can visit such websites as the Student Loan Borrower Assistance Project run by the National Consumer Law Center at www.studentloanborrowerassistance.org.

Debt Warning Signs: How to Spot Debt and What to Do About It

If more than one or two of these warning signs describe you, you may have too much debt:

• I'm not sure how much I owe.
• I can only pay the minimum amounts due on my credit cards and other bills each month.
• The total amount of money I owe isn't getting any smaller.
• I often pay my bills late.
• I am borrowing from one credit card to pay another credit card.
• I put off going to the doctor or dentist because I cannot afford it now.
• I spend more than I earn.
• I would have financial problems right away if I lost my job or missed a paycheck.

There are plenty of things you can do to start reducing your debt. Living in debt doesn't have to be permanent, but you will need a plan to tackle your payments:

1. Get help from a nonprofit financial counseling agency: Check to see if your local state university (Extension Service) offers a free debt management service. They can help you set up a repayment plan and write to your creditors.
2. Cut way back on your credit card use: Leave your card at home. Don't use it to pay for extras that you can't afford.
3. Get help from a non-profit financial counseling agency: Check to see if your local state university has a free debt management service. They can help you set up a repayment plan and write to your creditors.
   
4. Try one-on-one credit counseling: Contact the National Foundation for Consumer Credit online at www.nfcc.org or by phone at 800-388-2227.

How do I improve my poor credit history?

• Look at how much you owe.
• Prepare a realistic budget. See how much you can pay off each month.
• Contact the companies you owe money to and work out a payment schedule.
• Consider using savings, selling assets or getting another job, at least for a while.
• Consider getting a secured credit card to rebuild your credit, but be sure you understand what will happen if you cannot make those payments.
• Be sure to take the steps listed to maintaining good credit.

Building A Credit History Responsibly & Avoiding Plastic Debt

College is a time for revelations. Some will choose political affiliations, others will fall in love and most will learn rather quickly that registering for classes before noon is a recipe for disaster. As these young men and women embark on their post-secondary years, there is one realization that trumps all others: They are broke.

Sure, you have a meal plan furnished by your parents, but you soon realize that it’s not so easy to finance late nights out and “accidental” shopping sprees. Unfortunately for most college students, the solution to this problem does not lie in acquiring part-time employment or even cutting back on the extra expenditures. In reality, the modern solution has become the credit card, leading many young people today into premature debt and financial chaos.

According to Jim Pavia, editor of InvestmentNews, “Studies show that college students seem to be living in some sort of suspended reality or state of denial about their financial circumstances.” If you combine this notion with the marketing tactics employed by credit card companies, you reach a pretty scary conclusion: a college freshman is offered eight credit cards in his or her first semester and at graduation time will have an average of 6 credit cards.

Many financial professionals cite a vicious cycle in which students max out multiple credit cards, often with “expenses that are unrelated to education.” These expenses add up and the figures show it: 25% of college students graduate with over $5,000 in credit card debt. According to Anna Maria Andriotis of the Wall Street Journal, all it takes is “one reckless night of spending and one late payment [to] leave students with overwhelming debt and a damaged credit score – which could hurt their chances of landing a job or an apartment after college.”

It is apparent that college students are not using credit wisely, but that is not to say that they should not be using credit at all. When graduating, a sound credit history will be required when leasing an apartment or buying a car. As with most things, the key is to practice responsible money management. Here are some tips that may help you avoid damaging your future financial prospects:

1. Go Without the Free Swag: Many credit card companies offer gifts or special offers in hopes that you will sign up for a card. According to a survey by TrueCredit.com, this often works: 4 out of 10 consumers sign up for a credit card to receive a free gift or special offer. When thinking about signing up for a card, visit websites such as CreditCards.com to compare offers. That free I-Pod will not do you much good when you find yourself struggling with debt on an entry-level salary.

2. Watch Your Credit Limit: Most credit card companies will afford you a limit between $500 and $2000. According to Steven Katz, Director of Consumer Education at TrueCredit.com, maintaining a balance that is less than half of your available credit should help you preserve a solid credit score. While it is preferable that you pay your bill in full each month, you should at least adhere to this rule of thumb.

3. Beware of penalties: Perhaps the easiest way to get sucked into the cycle of credit card debt is the penalties that are written in the fine print of your credit card contract. Late payments can cause your interest rate to increase dramatically. Some credit card companies even practice “universal default.” The inclusion of this clause in your contract allows your creditor to penalize you for any late payments made on cards that you have with other lenders. For these reasons, it is absolutely imperative that you read the fine print and also avoid making late payments.

4. Be Smart: The above tips are specific ways in which you can guard against credit card woes. However, it is ultimately up to you to practice responsible behavior. College is an exciting time and many young people make impulsive decisions regardless of the financial implications. Having fun is important, but in moderation. Enjoy the last years of your youth but take care to safeguard your credit history for the future

How to Start Saving

No matter how much debt you're in, no matter how old you are, no matter what's happening this week on Wall Street, it's never too late to start funding your future by creating a savings plan. It's easy to put off saving for the future because of current bills and expenses. But don't let your current financial situation stop you from setting savings goals: close your eyes, hold your nose, and put that money aside for yourself.

Understand where your money is going now: Write down everything you spend money on for a few months. You may think about carrying a small notebook to record cash purchases and an envelope for credit and debit card receipts. Cellphones also often have a "Notes" function where you can record recent purchases. Put all of your spending information together on WISER's Budget Sheet to find out what your expenses are for an average month. By tracking your spending, you can look for ways to reduce your expenses and relocate that money into savings.

Make a plan to save a certain amount each month: Plan to put a certain amount of money or percentage of your income into savings every month. Set savings goals and make sure to stick to your plan. Once you start saving and stick to it, you won't even miss that money.

Reduce your credit card debt: Monthly credit card bills can tie up money that you could be saving. The Institute of Consumer Financial Education can help you find ways to lower your debt. If you want to continue using a credit card, but you're tired of high interest rates, visit http://www.blogger.com/www.cardweb.com for information on how to find the best low-interest credit cards.