Full Speed Ahead

With the divorce rate on the rise for the 65-plus crowd, coupled with women living longer than men, there’s a good chance that many women will be finding themselves on their own later in life.

Losing a partner due to death or divorce, exacerbated by wage disparity, unpaid work disruptions, substandard private pensions, and lower SSI benefits, usually results in a major drop in a woman’s standard of living during retirement. In order to correct this issue, women will need to take full control and management of their retirement planning.

In the next two issues of FULL SPEED AHEAD, we’ll examine some key personal and societal obstacles preventing women from being in the driver’s seat when it comes to overseeing their retirement finances. We’ll be presenting the story of a fictional woman named Lisa whose experiences are based on interviews, surveys and studies from a host of financial planning institutions, universities, and government agencies.

Lisa, a recent college graduate, entered the work force when she was in her early 20s and contributed 20 percent of her paycheck to the retirement fund her employer offered. She felt empowered and capable of making informed retirement planning decisions for herself until she encountered her pension fund’s incomprehensible jargon and complicated retirement charts.

Lisa sought out other forms of literature and pamphlets to help decipher her pension plans “gobbledy goop,” but found those way too technical and equally inaccessible. Her stress level got so high and her confidence level got so low that Lisa simply threw her hands up in despair.

Adding salt to the wound was the societally reinforced, unfounded bias, that women were simply not any good at math. Feeling incompetent, Lisa decided to leave things up to her Dad, who she considered better qualified and informed.

Lisa gave up her control without any real understanding of the implications of the decisions being made for her or the confidence to question them or make any further adjustments independently. When Lisa got engaged, her fiancé Pete took over where her Dad left off. Things started going down hill once she married and began raising a family.

First, she had to take time off to take care of her infant son, which meant no retirement contributions for two years. Then when she returned to work, it was on a part-time basis.

Having to pay for childcare, followed by preschool care and then after-school care all came out of her part time salary. Bills began to pile up, so Lisa reduced her pension contribution to 10 percent to help make ends meet.

Then came another child and with it way more bills. Lisa again reduced her retirement contribution to 5 percent. Her original 20 percent contribution was now whittled down to next to nothing.

Having children created a triple cost that Lisa simply didn’t consider. Taking time out (less in pension contributions) for maternity leave, then returning to work part-time (further reducing her earnings and pension contributions) and finally severely cutting back on her contributions to help pay for the costs of raising a growing family, decimated her individual retirement savings.

When it came to other household savings decisions, they were all made jointly, with Lisa often taking the lead role, but when it came to decisions regarding their wealth management, Pete was in control. Lisa continued to work part time and Pete continued to be the main breadwinner.

Most of Lisa’s salary went towards paying for after-school programs, braces, tutors, summer camps, college funds, you name it. Pete meanwhile got promotions along with bigger salaries and he duly increased his pension contributions, which Lisa assumed they would rely on when they retired.

As the years passed, whenever they had any extra cash they began investing it in the stock market and never gave Lisa’s insufficient pension savings any real thought. In fact, she and Pete never really discussed it and Lisa considered it to be just another annoying bill, or as she put it, “there was never any bang for the buck when it came to growing her pension.”

TO BE CONTINUED …

Allan Goldstein is a retirement coach and Long Beach resident.

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