This is a guest post from Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the advisor for The Motley Fool’s Rule Your Retirement service. He contributes one new article to Get Rich Slowly every two weeks.
I don’t know about Get Rich Slowly readers, but I can tell you that the majority of Motley Fool readers are guys, and that’s true of most financial publications.
That men are more likely to be consumers of investment information could explain the gender gap in financial literacy — especially among older Americans — that some studies have uncovered. I don’t mean to demean the better-smelling sex; in fact, some studies have found women deliver better investment returns than men do. But the deficit in financial literacy is especially troubling given the other challenges women face in retirement planning. Some of these challenges are faced by all women, while others pose particular problems for women who are or were married, especially if they put their careers on hold to raise a family.
The Troubling Statistics
Here are some stats to put it in perspective:
- Women, on average, earn 76% of what men earn, resulting in an average lifetime earnings differential of $250,000.
- Women leave the workforce for an average of 12 years to raise children or care for relatives, resulting in a loss of $550,000 in wages over their lifetimes.
- The average woman lives five years longer than the average man. Sounds good, but it means women have to stretch their retirement savings longer.
- Some of the biggest health-care costs are incurred in the year prior to death, which reduces financial resources left to surviving family members. Those survivors are most likely to be women, since wives tend to outlive their husbands.
- Women of the baby boom generation are more likely to be divorced than women from other generations and to have fewer children to rely on in their old age.
- A couple must have been married 10 years before an ex can claim spousal Social Security benefits. But most divorces occur within the first seven years.
In addition, here are some sobering facts from the Center for Retirement Research:
- As employers drop defined-benefit plans (pensions) for defined-contribution plans (401(k)s), divorced women may suffer. According to the center’s director, Alicia Munnell, “Traditional pensions give wives an automatic claim on their spouse’s benefits, but 40l(k) plans usually do not.”
- Despite being an average of three years younger than their spouses, wives usually retire when their husbands do. This can cut short their careers, savings, and retirement benefits.
- Among single women 65 and older, 28.2% are considered poor or near poor, compared with 22.7% for non-married men and 8.1% for married people in the same age group.
- A married couple’s combined Social Security benefit is reduced by one-third to one-half when one spouse dies. Also, payments received from a defined-benefit pension might be reduced or eliminated.
What’s a Woman to Do?
The solution for all women — single, married, widowed, or divorced — is to take control of their financial futures. It stands to reason that since women live longer, they should consider retiring later. Postponing retirement can mean a larger nest egg and Social Security benefits. Note that Social Security benefits are based on your highest 35 years of earnings. If you worked fewer than 35 years, those no- and low-earning years might be used to calculate your benefit. By working a few more years, you can increase your benefit. Also, non-working spouses can contribute to a spousal IRA, allowing for more tax-advantaged savings.
For married couples, both spouses should be involved in the day-to-day management of the finances. If one person handles the finances and the other doesn’t want to take over after he or she becomes widowed, assemble a list of trusted advisors who could assume those duties.
Remember that a married person can receive a Social Security benefit based on his or her work record or their spouse’s work record, whichever is greater. Because of their lower lifetime earnings, approximately two-thirds of wives receive benefits based on their husband’s record. But if the husband applies for Social Security benefits early — and thus receives a reduced monthly payment — the survivor benefit will also be lower.
For this reason, husbands should consider postponing the application for Social Security benefits as long as possible. The same principle generally applies to defined-benefit pensions, so be sure to consider the benefit to the surviving spouse when you’re deciding when to receive your pension and in what form.
This article is about Planning, Retirement
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I think we need to differentiate between websites/blogs that focus on money management/budget i.e. money basics and investing websites. A lot of the investing websites like Motley Fool and Seeking Alpha are read by short-sellers. Who is more likely to short sell? I think the study JD referenced is the one that shows that women trade less than men, so they are probably not shorting or trying to jump on the latest investment bandwagon. Sorry to stereotype, guys. I know there are a lot of long-term male investors as well.
Women have traditionally run the family budget/household and I would bet are more comfortable doing debt/money mgt. than investing, which accounts for the difference in readership on personal finance versus investing websites.
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This sort of information never fails to shock and scare me. Things like women earning less than men do in the work force is something I keep expecting to stop being true and yet there it is again.
It’s true, we have to take control of our own finances, whether we be single or not. My mom is a baby-boomer, divorced, dealing with medical issues and at the moment there’s not much I can do to help (having been laid off myself last year) and struggling to live on Social Security.
A few years ago I started a retirement plan and every year I’m more and more happy that I did. Still single myself, I have no intention of ending up in my mom’s shoes (and neither does she).
Thanks for the great info!
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A young feminist, this article is spot on. Part of my job is to teach volunteers how to file taxes for low-income residents in our area. I had one woman in my class last week who, when discussing filing statuses, threw up her hands and said, “I don’t know any of this–my husband has always done the taxes in our house!”
At that moment I decided that I must take control of my financial future. I can’t rely on everyone else to make decisions that are best for me; I need to be the one calling the shots. I need to educate myself and invest wisely.
One thing I strongly believe is that the years women take off to raise their children should be counted toward Social Security in a positive way. Raising the country’s next generation of scientists, doctors, politicians, teachers, workers, etc. is a huge task and it should be respected as such. By compensating women for taking time off from their careers to care for relatives and children, our country would show that we value the work and investment many women put into caring for family. Until then, I can only surmise that our society does not take motherhood very seriously and it makes me question how I will be able to balance a family and my job without missing out on either.
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@ Jay, I’m in my 30s and out of my college group (women) who have children only one works full time, one is part time and the rest are SAHM (none of the kids are babies, all 4+ at this point).
Early on in my career, one of my co-workers’ husband died from a rare illness. At the time she was on a reduced schedule at work, he worked full time in a well paying profession, they had two kids. The husband died within 6 months. When I got married a couple of years ago, she told me, always keep working in your chosen field you never know what is going to happen. She also told me to make sure we had good term life insurance as they didn’t have it and he couldn’t qualify once he got sick. She was left with a huge mortgage on a house that she can’t think of selling because they designed it together.
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Ugh! Why did you send me on the “free download” goose chase – it’s clearly from a year ago and no longer available. Time suck!
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I’m not sure where anyone got the idea that being helpless about finances was cute or sexy, or that it is acceptable for an able-bodied adult to not work when the opportunity presents itself. The old model of the “kept” wife was built on a system of dowries. She brought money and/or property to the union, plus she managed the household. And that used to be a LOT of work. Now, let’s face it, it really isn’t.
Re: why the gender gap: people just don’t want to DEAL with stuff. This would be why so many men don’t go to see a doctor until after their first heart attack. … Many women – myself included – feel like we are the ones taking care of business, making sure our relationships stay on track, managing a couple’s social life, keeping in touch with our families, making sure the home looks decent, if there are kids we’re doing 75% of that work; maybe women feel like managing the money, on top of everything else, is just too much to ask.
However, I’m with E #40 … very similar situations and viewpoints. Girls have GOT to accept that, like Smokey the Bear says, only YOU can prevent [financial] fires.
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“I’m not sure where anyone got the idea that … it is acceptable for an able-bodied adult to not work when the opportunity presents itself.”
I’m not sure where anyone got the idea that all able-bodied people need to be working all the time, or that they get to determine what is an acceptable or unacceptable level of work for someone else, not dependent upon them, to be doing.
“Many women … feel like we are the ones taking care of business…”
Many men feel the same way. Most people *feel* like they’re doing a lot of work because they experience every detail of the work they do themselves, but only the final result of the work that others do.
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@ Beth
“Yes, it’s sexism. You’ve already got the job and the family. If you’re trying to get a job or interview for a better position with another company, that’s another story! When managers assume that women aren’t going to be as valuable employees because they’re focused on their family, then that hurts all women. Especially those of us who are single! Why should I be judged based on another woman’s performance?”
And where did I say any of that? What I said is it isn’t sexism when a woman gets less compensation after she has re-prioritized her life away from work. Equal pay for equal work. Not equal pay for less work. If I apply for another job I will be honest about what I’m willing to do just as I expect the manager to be honest about what is expected of me. If I meet the demands I expect the same wage as a man. If the requirements are lowered due to my personal situation then I expect less pay because the value being delivered is less. Anything else is ridiculous and dishonest.
My husband and I work for the same company. Though we have virtually identical educational and professional background my base pay is higher (likely partially due to me being a woman and the perpetual line about how women make less, and I make their statistics better), but last year he earned more than I did because he was available for more OT. I brought home 95% of what he did due to not adding as much value.
The other point I made is the managers I know are very conscious of the fact that they can’t make assumptions. It’s illegal and they don’t want anything even SEEMING inappropriate. In fact the honest ones have told me that I have a lot more room to play the system because they CAN’T take things like time off work due to pregnancy into account. Some still likely do, but of all the managers I know most err on the side of caution and women.
@ Tyler
I absolutely agree on both points.
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Shara– Beth is making an argument about statistical discrimination. She’s saying that other women’s choices are causing employers to discriminate against her. Employers compensate her less on average because they can’t tell if she’s the kind of woman who will leave work or the kind that will stay, so they assign a higher probability to her leaving than they would a man. It’s discrimination against women who do equal work because employers believe on average than a woman will be more likely to leave.
Yes, hiring managers go through a lot of training to not make those kinds of assumptions, but they still discriminate in audit tests. Neumark et al. on hiring in restaurants is the most cited audit study on hiring of women. There are a ton on race including the recent Bertrand and Mullainathan, and a really neat natural experiment by Autor shows that when a race-blind hiring test is implemented the characteristics of the minorities hired changes even though the percent minority stays the same (a kind of proof that there had been statistical discrimination at that company, since SD predicts that hiring managers will get it right on average even if they pick the wrong individuals). Lahey does an audit on age and hiring. Rooth has one on obesity (which isn’t illegal to discriminate against in most states). Hiring managers also do badly on implicit association tests.
(And technically, men are equally as likely to leave any given company as women are… they just leave to work for a competitor rather than leaving to stay with the family, but employers remember the woman leaving after maternity leave more than the man leaving for a better job offer. I believe the citation for that is in the Economics of Women, Men and Work textbook by Blau, Ferber and Winkler.)
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@ Shara — OH!!! I think you and I are reading the situation differently. I do agree that people deserve raises and advancement based on their performance, not assumptions.
Nicole’s right though — women are up against a lot of workplace baggage. I think I had an easier time escaping discrimination when I was younger. Now that I’m over 30, I feel like people are expecting me to get married and get pregnant at any minute! Employers can’t legally ask about that — but the “where do you see yourself in five years” question is a hard one to answer!
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I think the point : “Among single women 65 and older, 28.2% are considered poor or near poor, compared with 22.7% for non-married men and 8.1% for married people in the same age group.” really sums up the situation. That is pretty clear : a much higher % of women have ended up in poverty at retirement.
But I do think (hope) things are improving. A much higher % of women are in the workforce now. Consider this, right now 57% of college students are women and women generally do better in college. That situation should be beneficial for the finances of women in the future.
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How can you not realize that to characterize women as the better-smelling sex is demeaning? Is that really the most important aspect of women that you can come up with? Why generalize us at all? Why not just say, “I hope that you don’t find the facts I just mentioned demeaning to women.” Instead I’ve become so distracted by your ignorant generalization that I didn’t bother to read what you wrote about. I skimmed it, though and as I am the money manager in my household, I decided that I didn’t need advice from a guy that thinks it is notable that women smell good.
(Okay, I wouldn’t normally to blow it all out of proportion, but I think it is really important for you to realize what kind of effect an offhand remark like that can have).
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An interesting fact to note is that only 25% of Americans between the ages of 21 and 44 have a degree and 50% of that same age group have taken college courses (US Census 2000). Shocking, but true.
This website, and I’m assuming most financial websites, has a readership that is made up mostly of college graduates. So while it’s true to say that the gender gap may be decreasing because the younger generation is better educated, we’re only talking about a small percentage of the population. College eduated women (and men) are a minority. We may have all our ducks in a row, but my concern is for the majority of women in that age group who are more likely to come across hard times and not have a degree to fall back on.
I’m not saying you can’t make a living without a degree because clearly people do. It just seems a whole lot harder!
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I’m not sure if anyone else commented on this (don’t have time to read everything), but I noticed that while Robert commented on the lost income from years off for caregiving, he didn’t comment on the career effects. For some this may be negligible, but I know for me it has been profound. I work as a math researcher, and I took one year off work for each of my two pregnancies, with 1 year working in between. So I was off for 2 years out of 3. Due to our VERY generous mat leave provisions, I was earning very nearly the same income, so I lost very little money, but it has slowed down my career progression substantially. I would estimate that between the actual time off plus the time spent rebuilding lost skills and knowledge (because seriously, who has time to read research papers when you’re taking care of a crying baby all night?) I have made no career progress over the last 5 years. I’m basically right where I was before the leave and finally starting to progress beyond that point. While it’s very hard to quantify the financial impact of it, it can’t be ignored.
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The Social Security system DOES reward women for taking care of children in the sense that a woman can receive a Social Security benefit equal to 1/2 of her husband’s benefit, even if she has not worked a day in her life. Thus the system transfers money from married couples with 2 earners to married couples with only 1 earner. I don’t have a problem with this except in the case of wealthy retirees; the spousal benefit should definitely be means-tested, in my opinion.
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I have been thinking about this since it posted, and I am still having a hard time working up a give a damn for two reasons:
People are more than statistics. We all know what we should do, and these numbers can show trends, but there are so many dynamics involved that I am a little dubious of any conclusions (such as ‘we need women oriented investment advice’).
And as far as the conclusions about retiring later/working longer: your financial picture is the sum of your financial decisions over the course of your life. Did you go to college? Did you start saving for retirement in your 20s? Some divorced women who worked very little have better retirement than those that worked their whole lives because they were smarter with the money as a couple, not because they earned more or necessarily retired later.
I make decisions based on my specific situation and it has nothing to do with being a woman.
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Am I the only one that feels this article was rather pointless?
“Women make less.”
“If you don’t have enough money to retire, work a few more years.”
That about sums it up for me.
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This is something I think a lot of older women are having trouble with. My grandmother, for example, was recently faced with balancing the checkbook and my grandfather’s estate following his passing. It is important for more women to take an active role in the family finances so there is not only a common goal, but also direction should one of them be unable to carry on.
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@Shara – The perception mommy gap is sexism. A coworker perceiving you as likely to take more time off because you have female bits = sexism. (Assuming something about you based on your gender). I’m lucky to be in a workplace where the men seem to take tons of time off for their kids since their wives/partners work. The partners, I’m sure, take some time as well.
As for women wanting to be the one at home… we often think we want what people expect of us.
@Debbie M
” it’s funny to me that you think younger women have an advantage. I think people like me raised during the feminist movement in the 1970s have an advantage because…”
Kids these days, they just don’t try as hard anymore, they take all our hard work for granted! To see some lively 20-35′s chatting it up about feminism, start at feministing.com. There’s some good reading on 2nd vs. 3rd wave feminism somewhere up there… and all of the generational fighting and finger-pointing that we need to STOP. Our overall fight is the same. If you’d like to change the focus of feminism today, then get active!
@guinness416 – completely agree.
That’s not to say that the “trained to ask guys out” 1970s feminists have a pass to stop fighting the good fight though. Nor us in the younger generation.
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You hit a nerve.
I have been working on a blog for my age group (50 Yr old) women. Most of my friends left the workplace for at least five to ten years while raising children. They are now working hard to catch up. None regret their choice.
I was lucky to have a female financial advisor when I was thirty. She was newly divorced and lead me through lots of great investments. It was those choices that gave us the lifestyle we have today.
I have always been the planner and investor. I hate that I will have to work for ten more years to really catch up- but those are the breaks. He gets to play in the barn- I get to go to school. Life could be worse.
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@Shara – just caught up on the “work less” part. That isn’t discrimination, except workplaces that don’t allow for having kids suck!
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I read just yesterday in a newspaper article that there was a US study that showed that women in their 30s and younger are more likely to have a degree and usually a better degree than their husbands/partners and therefore getting higher paid jobs. In the 1970s it was the other way around. I think as more women in the workforce get higher paid jobs, they are naturally going to learn more about money and become more financially savvy. Most will still probably end up dropping out of the workforce temporarily to have kids but I think women are becoming smarter with the financial side of things.
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Jay @49, I don’t know what state you live in, but in most it doesn’t matter whose name is on the title. Marital property is shared.
Debbie @37, being single and childless is probably the best thing you can do for your career, sadly. (I don’t mean that it is sad to be single, childless or both; only that these choices affect women in a way they don’t affect men.)
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Interesting article. I don’t disagree with a lot of the information you present, however I have to wonder if this trend is changing. I know many people in my generation are much more aware of their finances. There was an interesting article in the New York Times today about how more and more men are marrying wealthier women. The trend seems to be heading in the reverse – more women are graduating college or higher education, taking higher paying jobs, and building a higher net worth.
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I can’t wait to go through all of these comments (don’t have time now, but such a great topic!)
As the primary breadwinner for our family, I think it is important for stay-at-home MEN to consider several of the points as well — my husband has a hard enough time dealing with being a “trophy husband” but it also definitely puts him at an economic disadvantage (i.e. no access to a 401K etc.).
This is something that as a woman hell-bent on protecting myself and being self-supporting, I had a hard time understanding at first. Now I realize that all the reasons I am so driven not to have to rely on anyone — are the same reasons I have to ensure my husband doesn’t face the same pitfalls. Not just because he’s my husband and I love him, but because he has made sacrifices for us to be successful as a family.
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I love my kids but I’m petrified of staying home for any length of time. As an engineer, I’m worried about my skills going out of date and not being able to re-enter the workforce at the same level and/or pay.
So, yes, I think the earnings gap is real..because time off can be a real negative. And you also can be put on the mommy track whether you want it or not. Some people just assume you don’t want to travel anymore or whatnot because you have kids…even if you never said that yourself.
There’s no crystal ball that tells you what the future has in store for you. You may end up needing to be the bread winner for many reasons (not just divorce). I want to make sure I can always take care of my family if I need to.
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I disagree with Sam’s (#1) statement that women don’t think about the what-ifs. I think that instead they are willing to sacrifice for the good of their family –to their own long-term detriment.
Even though I write about personal finance, Mel (#29) stated exactly how I feel. My eyes glaze ove when I encounter posts about EFTs and buying gold. However, I do have a 401K and am on the road to a comfortable retirmeent.
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I got divorced at 33. While a shock to my system it made me realize that “happily ever after” may not be an option. I turned to Suze Orman’s “Nine Steps of Financial Freedom” and put 15% of my pretax income into retirement. I figured out how to buy a condo. Basically, I took care of myself not knowing what the future would be. Also read the Motley Fool.
I remarried seven years later. My DH has different investment outlooks than I but we will probably be okay in retirment–he invests in real estate and me in the stock market. While we are still paying over $1100 a month toward alimony and child support, we are making progress on our own financial picture.
Bottom line: it’s never going to be perfect but you need to be responsible for yourself and for those with whom you have become involved.
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@ Shara — Good point! I think there’s as much diversity within a group (like women) as there is between groups (between women and men). Rather than dwelling on the differences, I think we can look at the stats and think “well, this is one factor that I may or may not have to consider”. A lot is going to change in 30 or 40 years. (By then, life expectancy could be well into the 100s, so how many of us will truly be ready?)
@ Bucksome — One year at RRSP season I was chatting with married friends about how hard it is to financially plan when you don’t know what the future holds (i.e. Do I keep planning as if I’m always going to be single?) They laughed at me and said even though they were married they were still funding their own retirement because “you never know what will happen”. That really put things in perspective.
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I couldn’t help but notice that this post and the comments are severely lacking in one thing: an analysis of the significant and overwhelming role of sexism and its impact on women’s overall relationship with money. A lot of things mentioned as disturbing “facts and stats” of women and money is really just the effects of sexism and it needs to be called that. The word “sexism” or “inequality” was not mentioned once in this post and that is a disservice to a more complex understanding of the issue in my opinion. Some of the tips were certainly useful, but a lot was left out.
The unequal division of labor at home, unequal pay for the same work, sexual harassment at work, the restrictive gender roles that still permeate our culture (man makes the money, woman stays home with the kids), women’s limited earning potential because of the feminization of labor, restrictive family leave policies, lack of affordable childcare, sexism and racism in the hiring process and promotions, devaluation of work primarily done by women, flat out unpaid labor of mothers everywhere. This all contributes to those stats. And some women don’t have a choice about whether to “put their careers on hold to raise a family” It is just expected of them. Also, what about some stats and info about the experiences and challenges faced by women of color? Often they are experiencing racism AND sexism in the workplace and in society.
I would also add to the “What’s a Woman To Do” Section:
*support women’s equality
*speak out against sexism in all its forms
*donate time, money, or volunteer for groups that fight against discrimination in the workplace
*write your legislators and support legislation that works on better childcare policies or closing the pay gap
Also, men directly benefit from our society’s continued reliance and promotion of sexism. It is unearned privilege. Men benefit financially and in their careers when their wives stay home with the kids, they benefit from the second shift of housework and childcare responsibilities that often fall to women. Where is the “What Can Men Do” Section?
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mythago @ 73 – I’m Canadian, and we too are a shared property jurisdiction.
BUT the credit card company doesn’t care if you just got divorced and you were on your husband’s credit card for 20 years… they want to know what YOUR credit is like. So does the mortgage company when you go to buy your new house.
The utility companys here also won’t hook up a new property without a credit check or a large cash deposit.
You need a bank account in your own name so that the other spouse doesn’t have signing authority on it and can’t drain it dry the day you (or he) says the marriage is over.
If “your” car is in his name, you can’t sell it to pay your first months rent when you leave… or to pay the mortgage while you wait for the life insurance to come in after he died suddenly.
Legally you are correct, practically you are wrong.
(all examples from clients or clients of my associates)
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I think the moral of the story is that we need to provide more financial education for women and bring them into the mainstream of the conversation. We all know that the financial industry is predominately male, but I think that the more financial professionals who are proactively creating opportunities for women to get involved the better off we all will be.
If we want to change the statistics we have to do something different to bring more women in the loop. Obviously the women who comment on this site are, for the most part, already taking an interest in the financial area of their lives, but the vast majority of women in the US are too scared, intimidated, or overwhelmed to take action and get involved. 58% of baby boomer women have less than $10,000 in retirement… that is something that will only change if we can build awareness for women across the board.
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Gail Vaz Oxlade reads this site? OMG OMG OMG!
I like her message a lot more than the NYT article that was linked earlier, and I’m not just saying that because I’m a Till Debt Do Us Part fanboi. The NYT article seemed to focus on how her ex-husband did this to her. She mentions in passing that she wishes she’d focused on her own education more, but ends talking about how many other women are “discarded” by their husbands, as if divorce is a one-way street. She mentions having to make mortgage payments, which implies she got the house.
The problem isn’t the divorce, let alone whose “fault” it was. The problem is women being utterly dependent on their husbands. Like Gail says, it’s the Prince Charming syndrom. Marrying a man with a good job is not a career plan. It’s not even a financial issue, it’s an issue of unrealistic expectations. The sentiment seems to be “I don’t have to do anything I don’t want to, my husband will take care of that.”
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This post started out very promising and set the stage for thoughtful, insightful dialogue about a very important issue, Women & Retirement. The ending was disappointing primarily because the solutions were Social Security oriented and devalue the role of women as a nurturer and caregiver to children and the elderly (parents). It’s common knowledge that the Social Security system is hemorrhaging in its current state and is not sustainable. To advise people to make choices with the intent to get more Social Security is folly. Responsible retirement advice would mean that any Social Security disbursement would be merely gravy. Advising people to work longer misses the point of fiscal responsibility and being savvy. Money is a tool and should enable you to create the life you want, early retirement, staying at home with the children, assisting sick parents. The disparity in maternity and paternity policy is worth mentioning as well, there is a tendency for men to take off to “coo” the baby and women take off to care for the child and nurture it often with long-term consequences to her career. Also, if a man is a high earner and the wife makes the decision to stay home, her sacrifice should be honored with a spousal IRA. Last point – the personal finance blogosphere and investment industry can be very elitist and make women who are novices feel like they can never understand their money or have a good retirement if they do not appreciate the nuances of options, futures, trading etc. The reality is you can become wealthy investing in large caps, no load mutual funds, and index funds. The people who thought they knew it all were at the helm of this nation’s economy when we entered the deep recession.
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I reacted very strongly to reading this post. Not that I did not already know a lot of the information presented, but I have been thinking about taking time off from work to finish my degree this year.
I have been saving for my retirement (through work and an IRA) since 2002, have a mutual fund and savings accounts, and have owned a house for over five years. I started when my mom sent my sister and me an invite to have lunch with her financial adviser and other women investors. Only when we got there did we realize it was intended for women who were recently divorced or widowed. These women were so happy to see us – both in our early twenties and thinking about planning for the future – and it was an eye opener to hear about their challenges. I started my IRA and a mutual fund soon after, and have participated in my company’s retirement plan since as long as I have been eligible. I started the paperwork to max my IRA contribution for last year and this year after reading through this post and the comments.
So, I worry about taking time off to finish my degree, although I think its an investment I can make (and have the resources with my partner to do so), and it would open a lot of doors for me when I finish, although we plan to think about starting a family soon after so it may be a few years before I am back full time in the workforce. I don’t think I will need to take loans to do so.
Has anyone done this and have any advice for me?
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@ Tracy — I’d love to see your questions answered in a “Ask the readers” post (hint HINT J.D.!)
I went back to school to do a graduate degree, and sometimes worry about the time I missed in the workforce. However, besides the skills I learned, I also made great contacts, volunteered and worked to build my resume.
On the other hand, friends of mine who did their degrees and then immediately had kids lost this important momentum. It’s hard to get into the workforce even at the best of times, so it’s important to bridge the mommy gap with part time or freelance work in your field.
Best wishes, no matter what you do!
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Tracy– What is your degree in? Will it be something that will increase your: 1. happiness/job satisfaction, 2. income, 3. Employability, 4. Future earnings potential (meaning it opens up new promotions in the future that you could not get without the degree)? If any of those, then do it! #1 is most important, assuming that it meshes with #3.
If you’re talking about getting an English PhD, then do look at the employment and income stats for people with those degrees, especially from the schools you’re applying to. You may end up with your dream tenure track job but more likely you’ll have to adjunct a few years at little pay before landing a tenure track job in a place you may or may not want to live. In many sciences it’s the same thing but with a post-doc instead of adjuncting. You’ll have to think about whether or not the time spent doing it is worthwhile. A lot of people get those degrees and give up on the main goal after a while because there just aren’t enough jobs to meet demand, and regret the time spent. Some people don’t get the t-t job and move on but don’t regret the time spent because they enjoyed schooling.
Generally the advice is to start the family during or before getting the additional education if you’re planning on leaving the labor force to do so. (If you’re not leaving the labor force, then there’s no optimal time to have kids.) That way your new learning isn’t out of date when you want to get into the job market. You’re more attractive to employers with a new degree than with a degree that’s a few years old and no job experience in that field. Employers prefer the story, “She was out of the labor force taking care of children and now she’s going to be in it full time as evidenced by her commitment shown in getting this new degree” over “She went through the effort to get the new degree but did not want to (did she actually enjoy the field?) or was unable to use it (did no one want to hire her?) and may not be committed to the labor force.”
Part-time work or part-time schooling goes very well with child-rearing if you have the resources to make that work.
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@ Nicole — well said! When I was in grad school, one of my profs said that doing a PhD and then taking time off for kids was basically career suicide. I think the same principle applies to other careers too.
I’m going to play devil’s advocate here though: If someone waits to finish their degree until they have children, then doing part time school rather than full time keeps them out of the workforce longer, and they’re coping with the expenses of school at the same time as the expenses of parenthood. The resources that were there before the kids came along might not be available once they do. (Or rather, the priorities may change).
And if Tracy isn’t ready for kids now, how long is going to put off her goal of finishing school, and how will that ultimately affect her long-term financial goals? What would happen if she had her kids and lost her spouse? (or the spouse lost his job?) Would she be in a better financial position with that finished degree?
Like I said, just playing devil’s advocate here
There are two sides to every issue, and ultimately it’s what works best for the person and his/her family.
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My husband is currently reading Your Money or Your Life so we’ve been discussing it every night this week. I think it might be a good read for Tracy.
We need a certain amount of money to live comfortably. After that the money is not so important as other aspects of our lives, of which our vocation (which may or may not produce income) is one of them. The goal isn’t necessarily to optimize/maximize retirement savings, but to have enough. Getting a degree can fit with “enough,” even if it doesn’t pay as much in the long term as not getting the degree.
Otherwise nobody would get a PhD– they pay less than masters degrees once you factor in opportunity costs of time in school. But the PhD is a job requirement for some pretty nice job positions, and for some people (not me!) they have a positive consumption value during the time in the program.
There are a lot of factors to be taken into account when deciding whether or not to get more education (and when/if to have kids!), not just how much money one makes afterward.
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#24 Sam – thanks for the link, I enjoyed the article very much.
#5 Gail Vaz-Oxlade – I’m a huge fan, keep up the good work!
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More, please.
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@Tyler (#57) — I think I remember that you and your wife do not have kids, right? Does anyone in your social circle or the outside world give her a hard time or see it as odd not to work outside the home with no kids in the picture? Obviously caring for an elderly father and volunteer work are extremely important work. I have to admit, though, that my first thought was that I would be very uncomfortable in that situation myself. What would she do if the two of you divorced?
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Women need to start working for themselves — and they are, in greater numbers. We have the abilities to develop wonderful, creative and money-making businesses. I found this to be a great alternative, rather than having to deal with the constant age and sex discrimination that so many of us face. Now I blog and write eBooks and print books, and speak and sell them, besides selling online. New stats show that women are fleeing the workforce, using their own skills rather than remaining dependent on a system that isn’t that good, to start with.
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