By Mitchell E. Kauffman, MBA

If longevity is a race, then women are the winners: Women outlive men (Females 80.2 years and males 74.5 years); wives live 8-10 years longer than their husbands if they’re married at the same age; and over 75% of women are eventually widowed.

As a result, women must take hold of their financial futures.

The unexpected death of a husband or a recent divorce may mean that a woman is suddenly making all financial decisions. In some cases, they may have been doing this all along. But if not, the unanticipated responsibility can be overwhelming.

In addition, the consequences of poor planning can be devastating. Several studies conclude that after the death of a spouse, up to 80% of life insurance proceeds can be depleted—a lifetime building a nest egg could disappear within a matter of months.

Married or single, it can be beneficial for our clients to reflect on the top 10 financial challenges that women face with suggestions and solutions:

1. Putting the needs of others ahead of your own. A woman will often fund her child’s education before her own retirement, or she’ll loan money to relatives that may never be repaid. Solution: Pay herself first. I tell clients if they have ever flown, they have heard the flight attendant remind them to put the life vest and oxygen mask on themselves first, even before they help family members.
2. Spending money to compensate for emotional needs. Suggestion: Encourage clients to observe their behavior. Then create ways to get through difficult times that don’t require spending money.
3. Deciding whether to keep the mortgage or pay it off. Many advisors believe that for clients over 50 and plan to stay in their home then it makes sense to pay off the mortgage. It is important to be aware that women are often less comfortable with loans than men. As a result, they may decide to pay off the loan even if it’s not in their best interest. Suggestion: How we typically develop a plan depends on the following five factors: Tax bracket, the size of the client’s portfolio relative to the size of the loan, projected cash flow, the liquidity of assets, and what decision will be best for the client’s emotional situation.
4. Living in a home that is too large or expensive. Many women have a strong nesting instinct. As a result, women often place great importance on remaining in their homes. But sometimes there are better options. Suggestion: Similar to point 3, clients are advised to evaluate the five factors, and decide what is best for them.
5. Having an outdated or non-existent estate plan. Considering mortality is never easy. Suggestion: I tell my clients that one of the best gifts that they can provide loved ones is to have their finances in order after their death. Preparation means your estate can be settled more quickly with less cost and hopefully reduce some of the emotional burden on your heirs.  It can also help relatives avoid having to seek out court appointed guardianship, which can add more cost and even emotional trauma. Finally, it is always important to keep family members informed of financial decisions, the location of assets and estate planning documents, and make sure they have determined who will control asset matters should they become incapacitated.
6. Having an investment plan that doesn’t focus on the client’s individual needs. Does the client’s investment program reflect their income, growth, tax bracket, and estate? Suggestion: For clients fortunate enough to have more income than they need, consider income deferral and gifting programs. If their savings falls below the income they require, it may be time to review their expenditures and investment allocations.
7. Being too aggressive or too conservative with investments. Solution: Determine whether the client’s investment plan addresses their income needs and risk tolerance.  Seek objective input.
8. Holding investments too long. A common problem I see when meeting with clients is an attachment to their investments and an aversion to change. Solution: Part of the financial planning process involves creating investment benchmarks. It is a good idea to review and evaluate these with an independent advisor on a regular basis and make adjustments as necessary.
9. Seeking financial advice from someone other than an advisor who is certified in financial planning. Solution: Review an advisor’s experience and background, and request references.
10. Withdrawing too much or too little from a retirement plan. Suggestion: Deciding whether to take out more or less requires an objective outlook. Base the withdrawal amount on the client’s tax bracket and cash flow needs both this year and in the future.

Findings from the “Woman’s Guide to Long Term Care Insurance Protection”, a publication of  The American Association for Long Term Care Insurance (AALTCI), indicate that women who are older than 65 comprise 980,000 nursing home residents in the U.S. This is compared to only 337,000 men in that age group.

According to the Association’s Executive Director Jesse Slome, women benefit more from owning LTC insurance, as two-thirds of all insurance benefits are paid to women.

• 41 percent to single women and 25 percent to married women = 66%
• 12 percent to single men and 22 percent to married men = 34%
• The 2000 census found that there were 20.6 million women age 65 and over, compared with 14.4 million men, i.e. 50% more women than men.
• So, out of every 1000 seniors 600 are women and 400 are men•
• LTC stats say that 60% of all Americans over age 65 will need some kind of LTC before they die, i.e. 600 out of every 1000•
• Therefore 400 women and 200 men out of every 1000 seniors eventually use long-term care.
• Conclusion, women are 50% more likely to use long-term care than men.

If you would like to receive a “Woman’s Guide to Long Term Care” go to www.savethespouse.com or call us 24 hrs a day @ 856-988-7722 x2 and order your FREE copy today!

By Mary Quist-Newins, State Farm Chair in Women and Financial Services
Professor of Women’s Studies, CLU®, ChFC®, CFP®
The American College

Even before our country’s current economic woes, one could reasonably argue that the vast majority of both American women and men needed trustworthy, competent and financial professionals to guide them. As markets have continued to unravel in recent months, that need has grown. Moreover, navigating the complexities of Social Security benefits and integrating them into a well-thought-out plan of action require significant expertise.

Here are just a few unsettling statistics for perspective:

• Thirty-one percent of the U.S. workforce had no savings set aside. (1)
• Forty percent of all Americans end up retiring earlier than planned. (2)
• The U.S. savings rate experienced a steady decline from 1970 when Americans saved roughly 9 percent of their after-tax income to 2005, when the savings rate actually drifted into the negative. (3)

Since women, on average, have less savings than men, we can only imagine a more ominous picture. The sad fact is that many women face a nightmare of poverty in retirement. The data that illustrate this phenomenon are as tragic as they are startling:

• Almost three-in-four Americans older than the age of 65 living in poverty are women. (4)
• The median income for women over age 65 is more than one-third lower than men in the same age group. (5)
• A full 80 percent of widows living in poverty were not poor when their husbands were alive. (6)
• By some estimates, without Social Security, the poverty rate for elderly females would increase from about 12 percent to more than 50 percent. (7)

Factors that increase a woman’s retirement risks and potentially compromise her Social Security benefits include:

• Family matters: On average, women take 12 years out of their working lives to care for children and/or parents. (7) Fewer years in the workforce results in fewer dollars set aside for the future and lower Social Security benefits.
• Lower earnings: The wage gap of about 20 cents on the dollar to the average earned by men translates to an even larger proportion of income that should be saved and smaller Social Security payments. (8)
• Greater longevity: This means that a woman’s retirement savings and her benefits need to stretch much further. To compensate for both higher life expectancy and a greater need for self sufficiency, some have calculated that women need to save as much as 2 percent more than men every year for 30 years. (9)
• Singlehood: Women are more than twice as likely to be alone in their later years as men (10). In 2004, according to the Social Security Administration, 61 percent of women older than age 65 living alone had an annual income under $15,000. Even adjusted for inflation, that income still falls below $20,000 per year. (5)
• Sources of income: For 25 percent of unmarried women, Social Security is their only source of income. (11)

As financial professionals, it is essential for us to take note of these issues when helping our female clients with their retirement plans. It is all the more important when we consider how vital Social Security is for most Americans. Almost two-thirds of all beneficiaries older than age 70 are female and for three-in-four women, benefits represent at least half of their retirement income. (12)

Beyond the current state of affairs for women, it is likely we will see an increasing, not declining, dependency on Social Security in light of the current economic climate, persistently low personal savings and other risk factors. As such, it falls to us to not only become experts on the intricacies of Social Security benefits, but also when it might be best for a woman and her spouse, if applicable, to claim them.

In a 2007 article from the Journal of Financial Planning, Alicia H. Munnell, director of the Center for Retirement Research at Boston College, suggested that it is generally advisable for single women to delay claiming as long as possible. For married couples, wives (who are most likely younger) should claim early and the husband should delay. (13) However, with these, as with any “rules of thumb,” making sweeping generalizations can be dangerous unless our clients are (pardon the pun) “all thumbs.”

Since Social Security is the mainstay for many women, it’s important for financial professionals to carefully analyze a range of benefits and alternative income (e.g., working and asset-based) options. And, it’s not just her benefits that matter. Analyzing various scenarios on both spouses determines the impact of taking benefits earlier or later. As many women outlive their husbands, projections also must take into account what she might be entitled to as a surviving spouse with her potentially higher life expectancy. The health history and longevity patterns of both the husband and wife are also essential to take into consideration.

Simply put: Relying solely on basic assumptions, rules of thumb, or even the annual statement of estimated Social Security benefits will fall far short of what most women will need in a well-developed retirement plan.

An excellent resource for both financial professionals and the public is the Social Security Web site at www.ssa.gov. The site is rich in information, including frequently asked questions and the most comprehensive resource of all — the Social Security handbook. The handbook provides exhaustive detail on all aspects of the program and will help you build the expertise that will aid many of your clients.

In addition, the Web site provides four calculators to estimate the impact of claiming benefits earlier or later. You can then plug those benefit amounts into planning software, along with assumptions on other income sources (e.g., pensions, asset yield and liquidation, employment, etc.), estimated expenses, longevity and inflation.

Becoming an expert in Social Security and how to optimize benefits in a woman’s retirement might literally save her from a life of poverty. Most of us came into this business to help others. Here is a real opportunity for us to do just that.

The benefit of your hard work in putting together a well-thought-out plan? Industry studies show that planning not only increases a woman’s confidence, but also increases the rates of implementation and cross-selling. This means not only greater retirement security for your female clients, but also more referrals, higher income and maybe even the satisfaction of knowing you made a real difference.

(1) Helman, R., Greenwald, Mo, VanDerhei, J. Copeland, C (2008). Retirement Confidence Survey: Americans Much More Worried About Retirement, Health Costs a Big Concern. Employee Benefit Research Institute.
(2) McDonnell, E.C. & Dulisse,R.A.,(2007) Retirement Planning for Women (7.1). In Hayes, L., Marketing Financial Services to Women. Bryn Mawr: The American College
(3) U.S. Bureau of Economic Analysis
(4) U.S. Census Bureau, Current Population Survey, Annual Social And Economic Supplement, 2006 (Washington, 2007)
(5) Society of Actuaries, Key Findings and Issues, The Impact of Retirement Risk on Women, 2005 Risks and Process of Retirement Survey
(6) U.S. Census Bureau, Marital Status of the Population 15 Years and Older (Washington, DC 2003)
(7) Hounsell, C. Women Face Unique Challenges When Planning for Retirement. WISER. March 2006.
(8) Bureau of Labor Statistics, 2007.
(9) Longer lives, less pay — women not saving enough. Washingtonpost.com. July 8, 2008.
(10) Women and Life Insurance, LIMRA Int’l, 2005
(11) Women and Retirement Security. National Economic Council Interagency Working Group on Social Security. www.ssa.gov. October, 1998.
(12) How does Social Security help women today? Wachovia. August 2004.
(13) Married and Single Women Face Different Choices When Claiming Social Security Benefits. Journal of Financial Planning. June 2007.