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6 ways women over 50 can achieve financial fitness before retirement

BY   April 6, 2015 at 5:56 PM EDT
Photo by Getty Images

By and large, women over 50 will have different financial challenges than their male counterparts, so keeping financially fit is important. Photo by Getty Images

Keeping physically fit is always important, but as we age, it becomes even more imperative to maintaining quality of life. According to personal finance expert and Next Avenue contributor Kerry Hannon, the same is true for financial fitness.

Hannon stresses the importance of “financial fitness” for women, and especially for female members of the baby boomer generation, who are now entering their fifties and beyond. “Women have been part of the workforce more in this generation than before,” Hannon says, they are also likely to stay in the workforce longer. The full retirement age for Social Security has risen from 65 to 67, and, according to Transamerica Center for Retirement Studies’ “Fifteen Facts About Women’s Retirement Outlook,” 57 percent of women plan to retire after age 65 or not at all.

“If you have a choice between your kid’s college fund and your retirement fund, do your retirement fund.”
Women face some unique challenges in planning for their financial future. Women famously earn 78 cents for every dollar earned by men. In a recent article for Next Avenue, Hannon points out that women are more likely to deviate from their career paths by taking time off to raise children or care for aging parents. They also tend to work for smaller firms and nonprofits that may not offer to match employees’ contributions to their retirement savings plans, if they offer a plan at all. On top of that, Hannon says, “most American women will find themselves single at some point from the age of 65 to the end of life.” This means women should be prepared to navigate the financial world on their own in their golden years.

Research suggests the average American woman does not believe she is up to the challenge. A Fidelity study released in February found that 82 percent of women were confident in their ability to budget and manage their daily finances, but only 37 percent of women felt confident planning for their retirement. Hannon offers the following financial fitness regimen for women in their 50s who are seeking to increase their financial know-how.

Start with the basics.

On the first day of a new fitness plan, it is inadvisable to bench press 100 lbs or run 10 miles. A better path is to start small, lifting 10 lbs or running 1 mile, and build up to bigger things. Likewise, Hannon recommends wading slowly into the retirement planning waters.

“Pencil out a budget,” she advises. Having a solid understanding of how much you are spending now will help you estimate how much you will need later in life. If you are working, Hannon suggests not only taking advantage of your employer’s 401(k) or equivalent plan, but investing enough to receive a full company match if possible. “Consider that free money,” she says.

Hannon also recommends setting up an emergency fund outside of work if you have the resources, preferably an index fund or similar account where you can withdraw money in a pinch without paying a penalty.

For women seeking to further their financial education, Hannon points to a wealth of resources in print and online, including “The Charles Schwab Guide to Finances After 50” by Carrie Schwab-Pomerantz, “Women’s Worth: Finding Your Financial Confidence” by certified financial planner Eleanor Blayney, as well as, a program of the National Endowment for Financial Education and, the website of the Women’s Institute for a Secure Retirement. Women over 50 can also find retirement and financial planning advice on Next Avenue’s website. Those who have the time and funds could also enroll in a personal finance course at their local community college or consider hiring a financial adviser.

Do not fear the financial adviser.

Less than half of the women surveyed in the above mentioned Fidelity study felt confident talking to a professional financial adviser about money and investments. “It’s not like you need gobs of money to get someone to work with you,” says Hannon, who thinks a financial adviser or certified financial planner can be a valuable resource, especially for older women, who may not be as comfortable navigating financial planning resources online. Hannon recommends connecting with a professional through the databases of the National Association of Personal Financial Advisors, the Financial Planning Association or the Certified Financial Planner Board of Standards.

Take care of yourself first.
“Women often do put other people’s needs in front of their own,” argues Hannon, who observes that many women play the role of caregiver either to children or aging parents. But she emphasizes that taking care of your own needs is an integral part of financial fitness.

“If you have a choice between your kid’s college fund and your retirement fund, do your retirement fund,” she says. While many feel obligated to pay for their children’s education, Hannon stresses that this is not a requirement. There are many options out there for children to pay their own way through school, and they will have many more years to pay off their debt than you will to rebuild your nest egg. Also, if you do not have adequate funds saved for your retirement, the burden is ultimately shifted to your children, when they must care for you later in life. Along those lines, Hannon views estate planning as part of retirement planning, and recommends investing in long-term care insurance. (But not all experts agree on the benefits of long-term care insurance.)

Talk it out.

“Women are more comfortable talking about sex than salary,” according to Hannon, who believes failing to talk about your finances with your spouse or significant other “shows a lack of trust in the underpinnings of a relationship.”

“Build your (investment) portfolios as a team,” she advises, “it is kind of fun when you have a partner to do stuff with,” and that way both parties share in the weight of major financial decisions.

Hannon also encourages women not to keep the discussion of financial matters between themselves and their romantic partners. She suggests starting a book club with friends to read and discuss books about investing and managing money.

Lastly, Hannon urges mothers to talk to their daughters about financial planning. “Sit down with your daughters and do this together,” she says. “Women in their 20s tend to spend, men tend to save, as we age this seems to reverse.” Books like, “Prince Charming Isn’t Coming: How Women Get Smart About Money” by Barbara Stanny and “Get a Financial Life: Personal Finance in Your Twenties and Thirties” by Beth Kobliner can help give your daughter a head start.

Advice for divorcées:

“Rarely should you choose the house over retirement assets,” Hannon tells recent divorcées, “The best scenario, according to the experts I have talked to, is to sell the house and split the proceeds … I would negotiate hard for retirement assets over alimony if possible because alimony is taxable and that is just a short-term plan.”

Wondering if you have a claim to your ex’s Social Security benefit? You do if you are age 62 or older, were married for more than 10 years and have not remarried. Collecting this benefit will not impact what your ex-spouse receives, Hannon says. For more information on maximizing your social security benefits after divorce or otherwise, check out our weekly “Ask Larry,” columns.

Advice for getting back into the workforce:

“Get over yourself and don’t expect that the doors are going to swing wide open for you,” Hannon warns women seeking to re-enter the workforce. “You’re not necessarily going to pick up where you left off.” Hannon recommends attending alumni events and becoming active on social media to “pump up your network,” and let those around you know you are looking to re-enter the workforce.

“You may need to add skills to get back to the salary you were making,” advises Hannon, who cautions that “age discrimination is alive and well in the workplace.” In spite of this, she tells women not give up. If you are unable to find a full-time position right away, consider freelancing, contract work or even volunteering. These opportunities will allow you to learn new skills and grow your network, and may turn into something full-time or permanent. Our “Ask the Headhunter” column is a valuable resource for job seekers.

Along side a 401(k), independent savings and Social Security benefit, a part-time job is part of many women’s retirement plans — 49 percent of women plan to work after retirement, a recent survey found. Hannon views these four factors as “the four pillars of retirement.” These pillars provide the basis for women’s financial fitness in their 50s and beyond.

Have more questions about financial planning for women in their 50s? Check out Next Avenue’s full series on this topic. And join us on Twitter this Thursday, April 9, from 1-2 p.m. EDT for a chat with Hannon (@KerryHannon), assistant managing editor for Next Avenue Richard Eisenberg (@richeis315) and president of the Women’s Institute for a Secure Retirement (WISER) Cindy Hounsell (@WISERwomen). Follow along and chime in using #NewsHourChats.