Do Rich Women Fear Retirement?

According to a recent study by The Hartford Financial Services Group, women fear three things about retiring. They fear inflation, health and longevity. The study of 1,194 adult women between the ages of 45 and 74

“They have reason to be nervous. Women work 12 fewer years than men on average, have less put away for retirement and face high odds of a long life spent alone.” said Stephanie Chappell, The Hartford’s corporate gerontologist,

At the top of the list of fears was the fear if inflation. Of the women surveyed, 83% said that they feared that their purchasing power would dwindle due to inflation, compared with 69% of men. Smart women! Since the generally accepted rate of inflation runs between 3% and 4%, its realistic to see that your purchasing power will drop by over 60% in the next 20 years. Mind you that doesn’t factor in if we end up in a period of runaway inflation. Hmmm, could our current $4+ a gallon of gas and skyrocketing cost of food by a sign of high inflation. Well not if you listen to the government, but then the government is good at lying to us so don’t take them at face value.

If you read the news paper or watch the news you may hear some talk about the CPI (Consumer Price Index) The CPI is used by the government to assess where inflation.

The CPI was developed in the 1920s to monitor the cost of goods and services. During the Carter administration, the decision was made to remove high-cost items like food and fuel prices that would drive the CPI higher. Since the 70′s were a time of soaring inflation (stagflation actually) it’s not hard to figure out why the did this. I don’t know about you, but when food and fuel go up in prices, I feel it right away. So I’d say it’s a very relevant measure of TRUE inflation and to ignore it is an insult to our intelligence.

When the Federal Reserve sets interest rates, it bases interest rates on the core inflation rate; in other words, inflation without including the cost of food and fuel. Which is why they should have been raising rates recently as opposed to cutting them (but that’s a conversation for another time).

According to the Forbes “Investopedia,” core inflation excludes items such as food and energy because food and energy “face volatile price movements.” Sounds rather disingenuous doesn’t it?

In other words, since food and energy prices can spike upwards, as they have this year, the Bureau of Labor Statistics calculates “core inflation” without food and energy prices, under the rationale that food and energy price spikes are merely temporary price shocks that would distort the measurement of underlying long-term inflation. Unfortunately, in the real world the cost of food and fuel can’t merely be swept under the rug by those of us that actually by food and fuel!

If you’re a wealthy women that’s just started thinking about about your retirement, please keep inflation in mind through out the entire process of planning the retirement of your dreams.

75% of polled women saying that they were “very” or “somewhat” concerned with “declining health.” Over half of all bankruptcies occur as a result of someone that is blind sided with crushing medical bills that they were either not covered for or vastly under insured.

Add the rising cost of health care to fears of poor health, and 87% of the women expressed nervousness concerning retirement.

Sixty-four percent of the women said they were also worried about living too long, compared with 46% of men. Considering that the average women is widowed at a young 56 years of age, this is a very valid concern.

As I’ve mentioned before, women have a tendency to be too cautious when it comes to their investment choices and should be moved away from being “ultraconservative” investors to help build a realistic retirement that will stand the test of time.

Looking into Long Term Care (LTC) and disability insurance would be a very prudent thing to do.

Wealthy Women Still Need Long Term Health Care

As the baby boomers get older, the spector of failing health hovers over them like a vulture waiting.  And like all things, the rising costs that accompany health care could add to the increasing complexity of retirement.  How bad is the situation?  Well according to a according to a study published by the journal of Health Affairs, illness and medical bills caused half of the 1,458,000 bankruptcies in 2001.  Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem.

Surprisingly, most of those bankrupted by illness had health insurance. More than three-quarters were insured at the start of the bankrupting illness. However, 38 percent had lost coverage at least temporarily by the time they filed for bankruptcy.

Most of the medical bankruptcy filers were middle class; 56 percent owned a home and the same number had attended college. In many cases, illness forced breadwinners to take time off from work — losing income and job-based health insurance precisely when families needed it most.

The research, carried out jointly by researchers at Harvard Law School and Harvard Medical School, is the first in-depth study of medical causes of bankruptcy. With the cooperation of bankruptcy judges in five Federal districts (in California, Illinois, Pennsylvania, Tennessee and Texas) they administered questionnaires to bankruptcy filers and reviewed their court records.

Dr. David Himmelstein, the lead author of the study and an Associate Professor of Medicine at Harvard commented: “Unless you’re Bill Gates you’re just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick.” Read that quote again…”Unless you’re Bill Gates you’re just one serious illness away from bankruptcy.”  Hopefully you’re at full attention now. 

According to the U.S. Health Care Administration costs are increasing at 5.8% per year and could triple in the next 20 years.  At those rates, by the time you or your spouse need long term care, you may have to shell out between $500,000 and $1,000,000! As a women, imagine what that would do to your retirement if you spent a million dollars to take care of your ailing husband (remember, statistics show you’ll outlive him by at least 8 years) Now what happens if YOU end up needing some type of long term care?  Will you have yet ANOTHER million dollars to spend on you needed medical treatments and proper care? 

Now let’s add yet another layer to this.  What happens if you are responsible for your parents?  Can you afford to take care of their long term needs?  What about your spouses parents.  There currently are people who have been forced to take care of two sets of ailing parents and can’t even begin to think of their long term needs and retirement.

Don’t be fooled into thinking that your long term care needs are decades away.  Working age Americans; those 18 through 64, account for a full 39% of those who need care.  This means that one could need some long term care well before their investments have had time to mature and grow.

What ever you do, thinking about your health and long term care are an integral part of your long term financial future.

Why Wealthy Women Should Keep Assets in Their Name

Because the stakes are so high for rich women, they should keep as many assets as possible in their name.

Why should they do so?  There are several reason:

1) If the loans and credit cards are in your spouse’s name, credit reporting companies may put your credit as inactive, meaning that your FICO score could plummet. This may not seem like a important now, but if you end up divorced or find youself suddently widowed, your problems are just beginning.

Let’s say that you and your husband lived in a $3 Million dollar home and the loan on it is for $2.4 Million.  By not being on the loan, your husband’s credit will benefit immensely from paying the loan on time over a period of years.  If he dies or you divorce,  your credit will not show this high credit amount and you won’t be in a position to buy comparative real estate without putting a substantial amount down.  In fact, your FICO score can drop drastically within 6 to 9 months if left dormant. 

Since one of the main keys in maintaining and growing one’s wealth is through the power of leveraging your money, that will not be an option for you for a long, long time.

The flip side of this story is if your husband has some expensive habits that you’re not aware of he can drage down your credit. Think that your picture perfect husband is above that?  You may be surprised.  Bill Bennett former drug czar under George H.W. Bush and author of “The Book of Virtues,” was discovered to have a gambling addiction.  How bad was his addiction?  Documents show that in one two-month period, Bennett wired more than $1.4 million to cover losses. When all this became public in 2003, do you think his wife had a clue about his gambling addiction?  Not a chance.

When pressed to comment on the reports of his gambling habits by Newsweek columnist and Washington Monthly contributing editor Jonathan Alter, Bennett like a good addict is prone to do, rationalized his addiction.  He admitted that he gambles but not that he has ended up behind. “I play fairly high stakes. I adhere to the law. I don’t play the ‘milk money.’ I don’t put my family at risk, and I don’t owe anyone anything.”

2) If for some reason you need access to your cash for an emergency of some sort but your husband’s assets have been frozen or garnished due to an IRS tax lien, civil litigation.  An old judgement that occured before you were married can come back and haunt you like a bad nightmare.  Depending on the state, there can be a 20 year statute of limitations for enforcement of judgments.  Like civil judgments, back child support can also come back and haunt you for up to 20 years.

With all the things that could come back and bite you on the ass, years after you’ve been married, do yourself a favor and make sure as many assets are held in your name as possible.  Also make sure that when it comes to big ticket items like real estate loans, make sure your name is on it as well.

How Women Lose Thousands of Dollars Every Year.

For many years women have been dealt a harsh hand often called the “Glass Ceiling.  Though it is a very real phenomena, unfortunately, many women contribute to this ceiling.   How you might ask?  Sadly several studies have shown that women don’t bother negotiating their salary and benefits package with the same aggressiveness that men do. An article titled How Salary Negotiation Contributes to the Wage Gap discusses how women often drop the ball and leave thousands of dollars laying on the table.  They’re more often apt to accept the starting offer without negotiating for a higher salary, company car, stock options, or other similar perks that men will fight for.

In what could explain some of the chronic wage gap, men are more than four times as likely to negotiate a first salary, said Linda Babcock, co-author with Sara Laschever of the 2003 book “Women Don’t Ask: Negotiation and the Gender Divide.”

What’s left on the table over the long term can be staggering: The consequences of failing to negotiate a first salary can lead a person to lose more than $500,000 by age 60, Babcock said. Losses accumulate, she said, “because someone who comes in at higher salary, even if you’re getting the same rate increases, gets more every year.”

In a survey done last December by 24×7 Magazine, the wage gap had decreased to 9.4% in 2007, down from 11.5% the previous year.  How much of that difference can be attributed to lack of more vigilant negotiation on the part of women we don’t know but it’s definitely something you’re going to want to keep in mind the next time you sit down for a job interview and discuss salary and compensation packages.