Savers Die Broke
Putting your money in a bank savings account or a sock under your bed is virtually the same thing. The amount of interest you will make from a bank account will be small and many times not even sufficient to cover the costs of inflation, meaning you’ll be losing buying power as you save. The only way to save yourself is to invest your money, not just save it.
Don’t Rely on Social Security
At best, the Social Security Administration estimates women can expect Social Security to cover about $756 on average a month compared to the average for men at $985 monthly. Women represent 71% of Social Security beneficiaries age 85 and older. Consider this: in 2000, only 18% of women aged 65 and older were receiving their own pensions, either as a retired worker or a survivor, compared to 31% of men. That means in 2000, 82% of women aged 65 and older were either living on Social Security or relying on other forms of investments other than corporate pensions. We already know that the amount of Social Security income on average is not sufficient to support you. There are no assurances that Social Security will even be available to you in the future. So, you can’t rely on it.
It’s Never Too Late Or Too Early
Yes, is would have been very good to start investing when you were 20. However, you can accumulate savings from investments starting at any age. And if you live to be 80, you need to start now so you are ahead of the game. Even a child can start learning to manage money.
Be Confident About Investing
When investment clubs are evaluated on performance, women do better than men. Women run clubs report a 23.8% average annual return vs. 19.2% of male clubs.
Success at long-term investing, what you must do to maintain a lifetime financial plan, seems natural for women. Women see themselves as less likely to be risk takers than men: 31.8% of women labeled themselves conservative investors compared with 21.7% of men (CondeNast). Women take more time to investigate before they invest than men. One study found that women spend 40% more time researching a fund before they invest. Women tend to be less impulsive and less inclined to act on a hot tip than men (CondeNast).
Interestingly, women invest online more than men do and the rate of women investing online is growing faster than men (Forrester Research). Since investment and planning education is out there, this trend bodes well for women. Check out the many credible online resources available to learn more.
Learn About Insurance
Insurance provides protection, but costs money.
Certain types of insurance are a must. The costs of medical care and drugs are so exorbitant that you need to have some health insurance protection. You cannot legally drive a car in many states without insurance and you need to protect your home and its contents with property/casualty insurance. The issue of whether to buy life or disability insurance is trickier.
If you are young and need to protect to your family if you die or are disabled, you need to have insurance. How much insurance will depend on your income, standard of living and age.
If you are young, your chances of becoming disabled are increased—some planners say you need to plan to replace at least 60% of your income if you are disabled. Insurance companies today are offering long-term care insurance coverage. Based on the statistics, it does appear this type of coverage should be considered depending on your age and family responsibilities.
If you are in your mid 50’s, however, your chances of becoming disabled decrease and you may not need to provide the same amount of disability or even life insurance for your family. Perhaps your children are grown and self-supporting and you have sufficient funds in your retirement accounts to cover your spouse if you die. Insurance is a major expense. So you need to evaluate how much and what coverage you should have over your lifetime. Research, research, research!
The Internet, your local library and other available sources (including insurance agents) are good places to start. But, like anything else, be wary of insurance costs and read and re-read the coverage you obtain. Ask a lot of questions and know in advance what your insurance policy covers and what it excludes.
About the Author: Lyn Striegel is an attorney in private practice in Chesapeake Beach and Annapolis. Lyn has over thirty years experience in the fields of estate and financial planning and is the author of “Live Secure: Estate and Financial Planning for Women and the Men Who Love Them (2011 ed.).” Nothing in this article constitutes specific legal or financial advice and readers are advised to consult their own counsel.