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Chapter One
Planning For Your Retirement
What Lies Ahead?
Every woman has the power to create her own future. With proper planning and careful choices, she can realize objectives and goals she never dreamed possible. You can be that woman.
Through proper planning now, you will no longer carry the deep, haunting fear that someday you will be a bag lady, living in poverty and at the mercy of society.
When you develop your potential to meet diverse challenges, you will find talents and skills unknown to you today. The process begins in easy steps, at various levels, and allows you to achieve your ideal life in later years. Many women fear poverty in their old age, but with close attention to the components of finance, health, and networking they can negate that threat.
The most important first step is the decision to take action. Apathy does not solve problems or bring a secure future.
Women often spend more time planning for an annual vacation than they do for retirement. Most people have no idea of what to expect when they retire, and are only vaguely aware that it should occur somewhere in their 60s. Actually, there is no mandatory retirement age, as specified in Federal legislation. You must decide when will be the best or most appropriate time to retire.
Retirement planning is important for everyone, but factors unique to women make suitable preparations essential. Consider these points about women; they
- earn less than men, so the total amount available for retirement-funding is less.
- work for smaller organizations where no pension plan is provided. Part-time work complicates the ability to save. One American in three, about 36 million workers, works part-time or as a temporary or contract employee. During the 80s, this figure grew by 40 percent.
- live longer and do not have enough income, thereby suffering a severely lowered standard of living in later years.
- take time out of the traditional work for child care, resulting in fewer total years to contribute to a retirement plan.
- have different health needs. Older women tend to have chronic ailments, while the typical health problem of men is heart attack.
People look forward to calling their time their own in retirement years. To turn that dream into a comfortable reality, critical decisions must be made at an early age.
A few of the areas to consider are:
- money,
- health care,
- housing arrangements,
- use of time,
- continued employment,
- pension fund options,
- relationships with family and friends, and
- Social Security .
Some individuals are so overwhelmed about the idea of taking control of their finances that they never begin to think seriously about retirement, and trust to blind luck that "things will work out." Others concentrate only on financial arrangements, and give no regard to the use of their time or where they will live.
Health care is a serious issue. The cost of health care continues to rise at an alarming rate. If an employer pays most or all of the cost of health insurance, apathy results. As the cost of premiums increases, however, employers are forced to limit coverage. Trade unions constantly seek to protect their members from this erosion, but many workers are outside that umbrella. The most expensive alternative to employer-provided coverage is buying private health insurance on an individual basis. Some health plans extend into retirement; others do not.
Review your health insurance before you need it. A careful inspection of your present plan is an important step that should not be overlooked. Some of the features you should know are:
- the amount of the deductible,
- illnesses or conditions that are excluded,
- the length of hospital stay that is allowed,
- out-patient services that are included, and
- the degree of freedom to choose facilities and physicians.
A common worry is that the Social Security System will either be entirely gone, or seriously diminished, by the time retirement comes around. Support for this theory stems from the recognition of the large number of "baby boomers" who will reach retirement age at about the same time. Presently, contributions of those who are working pay for the current retirees. When the largest segment of the population (born between 1949 and 1964) withdraws from the work force, will the remaining workers be able to support them at the present level?
Clearly, the system must be overhauled to adjust for the unusual number of people in the same age range. It is our belief that Congress will make changes to address this issue. We do not base this on a blind faith that "the government will take care of us," but on the reality that members of Congress are concerned with reelection, and to destroy the Social Security program entirely would be political disaster, for a party and for individuals. We believe the system will survive, albeit not in the present form. We can only make our plans in accordance with the system as it stands today. Future changes must be carefully monitored for the retiree to have the level of security that she desires.
Many believe, often secretly, that Social Security will provide the sound financial base they will need; this becomes the foundation for their peace of mind during retirement. They forget that Social Security was designed as supplemental income, not as a substitute for savings.
A woman may consider her own Social Security account to be unimportant because she expects to claim retirement benefits as her husbandÕs dependent. A dependent wife receives 50% of her husband's benefit under Social Security when he retires at 65 and when SHE reaches age 65. If she elects to retire at age 64, the benefit would be about 46% of the full amount . At age 63, it would be about 42 percent, and 37.5 percent at age 62. If this amount becomes her only source of income, she will face severe financial constraints.
Social Security provides survivors' benefits for the widowed, for dependent children under age 18 and for disabled persons of all ages. A widowÕs benefit is available when she reaches age 60.
In the United States, the average age a woman becomes widowed is 56.
A worker may continue to earn some wages after beginning to receive Social Security retirement income, provided an annual exempt amount is not exceeded. Continued employment after formal retirement is an attractive choice because it:
- gives the worker an identity,
- provides additional income without endangering Social Security payments,
- supplies necessary social contacts,
- satisfies the need to contribute to the community and to society, and
- is less strenuous, both mentally and physically.
Part-time work allows the retired person the best of two worlds: free time to enjoy leisure activities and the benefits of employment. Don't count it out as an option. New labor markets are opening to older workers and the barriers of discrimination are coming down due to changes in laws and penalties regarding age bias.
A frequent response to financial or overall planning is: "I have so little, why bother?" The answer is: "You probably have more than you realize."
Fear of admitting poor choices causes some people to resist an evaluation of their financial position. They become alarmed when they realize how much they spend on consumable items and impulse purchases, or how much they owe on credit cards.
If you reduce expenditures, you have more money available to save. The same is true of reduced debt. If you can maintain a current balance on credit cards, for example, it is easier for you to put money into savings for retirement. No matter how small the amount saved, a regular savings plan combines the benefits of creating good financial habits and allows for the compounding of interest to boost the principal.
The best ways to save are:
- Make savings a TOP priority.
- Start now with regular amounts, no matter how small.
- Take advantage of "painless" methods of deposit.
- Reduce debt.
- Review past decisions and spending habits to find new sources of cash.
The purpose of planning is to provide for retirement living expenses. You can project the retirement lifestyle youÕre likely to want from the decisions youÕve made to date; an appropriate and comfortable life may be developed from today's decisions.
Careful consideration of after-retirement activities will substantially influence your basic financial requirements. One couple may dream of travel in a motor home, whereas another may choose to help disadvantaged people through church work. One woman may take advantage of the opportunity to learn to play a musical instrument, a life-long ambition; another may become active in politics or volunteer at a day-care center for handicapped children.
Older children are taking longer to leave home. The Census Bureau reports the highest ever percentage of children age 18-24 still living at home: a whopping 53 percent. In the next age level, 25-34 year-olds, may return but are likely to bring their children with them. Thirteen percent of this age group created a three-generation family when they moved home.2
Grown children who no longer require financial assistance are a thing of the past. Fewer young families are able to afford a first home and many look to their parents for financial help. The Census Bureau also reports that 94 percent of families headed by a person under 25 could not afford a median-priced home.3
Another common problem is that parents are paying for their children's college costs while saving for their own retirement. Women are generally waiting longer to have children. A couple could have children in college and at the same time be responsible for the care of aged parents.
Some couples plan together for retirement through one party's pension plan. Then divorce, an unexpected factor, strips away that protection for the other person. Financial responsibility is the concern of every individual.
The best contingency is for each person, married or not, to become self-reliant. Couples should consider all possibilities when planning together, and they should aim for a state of "cooperative independence," where each party receives equal consideration.
Rule Number 1: Make a Notebook
The financial base for retirement is complex and requires much thought. The important point is to have a central place for all the crucial data that will help you make decisions. A loose-leaf notebook can be helpful in making these plans. Label sections:
- Annual net worth statement
- Family responsibilities
- Lifestyle plans
- Investments and Investment Strategies
- Important papers and their location
- Health care reminders
- Social Security updates
Let's look at the information you should include in each section of your plan.
-Annual Net Worth Statement. The annual balance sheet measures your financial position. When constructed on a regular basis, it provides a summary of financial activity at a glance.
-Family Responsibilities. Demands on your income and expenses in later years must be considered. Is it possible that you might be the care provider for an elderly parent or in-law? Women have the traditional image of nurturing and it falls on them automatically to take charge of the elderly family members, including their husbands' parents.
-Lifestyle Plans. Use your imagination when considering the lifestyle that will bring you greatest satisfaction in later years. You should have some idea of how you expect to live after retirement. The bumper sticker that says "Retirement Means Half As Much Money and Twice As Much Husband" contains a kernel of truth.
Verna L. retired from the working world when her husband did, she from teaching, he from industry. It happened earlier than they wished because the company where he worked was swallowed up in a corporate take-over, and he, along with many others, were asked to take "an early retirement." His retirement income was less than they had hoped, but with hers added, it was adequate.
Verna rejoined the workforce on a part-time basis as the public relations director for a large hospital. The balance of her time was spent in community activities. She quickly rose to the governing boards of the organizations where she was active. After several years, Verna asked herself, "Shall I quit my part-time job?" She didn't want to work past the point of producing top-quality work, as she had seen other older workers do. Her husband assured her that they could "get by" on their combined retirement incomes.
The critical issue for her was: Am I willing to do what I am doing now for pay at the hospital for free in the clubs? Her final answer: Not yet. She knew she would be thinking of the missing paycheck, and would resent the requests of volunteer groups. She decided to keep her job, and to reevaluate on an annual basis.
If you are outgoing and active, like Verna, and select a retirement lifestyle that requires financial support: dues, transportation, refreshments, appropriate wardrobe, and cash contributions. Include these elements in your design. Women who are interested in learning new skills at, say, golf or tennis, should include expenses for sports equipment and playing fees, expenses not in their present budget.
-Investments and Investment Strategies. This section should receive a great deal of attention. Strategies are the channels through which investing goals will be achieved. Generally, the younger the investor, the less disposable income she will have to invest. Her emphasis should be on appreciation, or growth. The older investor who is within sight of retirement will find income, or yield, of greater importance. The time factor influences both women.
Expect your plan and investments to change. Some portions may move more quickly than others. The advantage of this section of your notebook is the same as the Net Worth Statement: data are all in one place. It is easy to punch the regular reports from a mutual funds or transaction reports from your financial planner and put them in the binder.
-Important papers and their location. You may know exactly here all your valuable papers are at the present time, but provisions should be made so that another person could reach them at your direction. A listing kept in your notebook will also remind you of renewals or updating that might need to be done on a regular basis. Constance J. took a leave of absence to care for her ailing mother, who lived in a neighboring state. Her mother, while waiting for her chemotherapy treatment one day, casually said: "You know, dear, I keep the key to the safe deposit box upstairs in my sewing basket." Constance was momentarily stunned. The subject had never come up before, and she never would have thought to look there.
-Healthcare reminders. The need for regular examinations and subsequent test results may be centralized here. One physician always tells his patients to "keep these test results, and when you travel, take them with you. Then, if you get sick, the local doctor has immediate data to go on."
-Social Security updates. Social Security will play an important role in your retirement, if not for income, for the access to Medicare and related benefits. Keep all your records in a central location, or identify clearly where they may be found.
Your financial planning notebook will give you the satisfaction of watching your assets accumulate, and you will also find it helpful when you're preparing your income tax.
Interview
Two women were talking quietly in a coffee shop. Ethel's low-key manner had brought a sense of equilibrium to the elementary school office where she had spent most of her career. She and her husband were now enjoying retirement, almost.
Ethel, the elder of the two women, was a quiet contrast to June, who was vivacious and animated. June and her husband were also retired. June was quick and outgoing; Ethel was thoughtful and shy. June had always been a homemaker, but had given a career's worth of time to voluntary public service. Her two sons were out of college and on their own at last, so she and her husband were enjoying retirement.
Ethel spoke softly. "The biggest adjustment I had to make was living with a husband 24 hours a day. I found a new and different man. I got to know him at a personal level. I learned why he reacts the way he does. Children can be an adjustment, too. If you're at a loss for outside interests, you tend to dwell on your children and their lives. You want them to be too dependent on you. I was doing that, but I finally realized what I was doing to them and to myself."
"I don't think a retired woman should be the resident babysitter, either," June responded. "She should set up a schedule when she can be available to sit for her grandchildren, but she should have time for herself, too." She went on: "I also believe you are not financially responsible for your grown children. Any financial dealings should be done on a businesslike basis. Pretend you are lending money to someone you don't like."
Ethel nodded. "Another thing is that when you are 35 or 40, you should choose a well-being program. When you retire, you need it more than ever. It should suit you. I love my aqua-exercise class. I especially enjoy walking because I can be alone. It's my time to myself."
"Me, too," June said. "I get the best solutions to problems when I'm running. You also need to develop support groups. It's hard to overestimate the positive role a church plays in developing support groups. Or develop an interest in music, cards, or art. But a woman shouldn't wait until she's retired to start those things. Support groups are great, no matter if you're a couple or if you're alone."
"Getting my husband to go anywhere is tough," Ethel admitted.
"I had the same problem, but I just made it a point to schedule things he would like to do, and I included other people. At first he balked, but I ignored it and did it anyway. Now, he's much better. Start small and keep at it."
"I will," Ethel smiled.
June went on. "I learned something related to this subject when I visited relatives this summer. I learned to my surprise that it isn't just the girls in the family who are interested in getting the china or the family photos, or the jewelry. We sometimes overlook the boys, or assume they aren't interested.
"I also got a good idea from a financial consultant. She said a duplex is a good living arrangement for a single woman. It brings in an income, which helps pay for itself, and it keeps someone close by."
"That's a support system right there," Ethel added.
"Yes, and I met a widow, whose house is owned free and clear, but who pays herself rent every month. She sets that money aside for maintenance, so there's always a nest egg for those unexpected repairs that always seem to crop up."
"One more thing that's important," Ethel concluded, "is being of service to somebody else, outside the family, I mean. It's a great way to meet others, and there's a big satisfaction internally. It keeps you young."
Rule Number 2: Start Branching Out
After your savings begin to accrue, you should study more sophisticated and rewarding methods of handling money. The adage "don't put all your eggs in one basket" applies to a nest egg, too. Books, magazines, and newsletters are available as resources. Public libraries are excellent support systems to help you investigate all types of investments, as well as specific companies.
You should monitor your health problems, both real and potential. It is easy to assume that you will always be in the same state of health as you are today; but that is not the case for many women. For example, if a certain disease or condition is prevalent in your family, you should pay close attention to your health in that particular area. You should read about the condition, and ask questions of your physician; together you should work to be alert to signals of the disease. Preventative measures and regular examinations are a must.
The older woman is likely to be alone. Statistically, men live fewer years than women, yet many women are not willing to face that possibility. Some say, "If I am widowed, I will marry again." Older women are less apt to remarry, simply because there are fewer men, and most of them are already married. The 1990 census showed that most older widows and widowers do not remarry. Or, to view the problem from another perspective, in 1987 less than 2 out of every 1000 older women remarried4.
Appraisal of acceptable single lifestyles is important. Many older women are content living alone, happy to make spur-of-the-moment decisions without consulting anyone. Others long for the companionship and conversation of a partner. One person may be delighted with sharing her house with another, while the next may feel crowded and inconvenienced. Much thought and consideration must be given to these options; these are decisions that should not be made in haste or under pressure.
Internal blocks may prevent success in relationships and in activities. How many times have you heard someone say, with envy, "That's wonderful, but I could never do that"? You may be sure that she could accomplish the task, but she won't allow herself to accept responsibility for the activity. Or perhaps you have heard another version of the same lament, one that goes, "Oh, I'm just a secretary," or account executive, or whatever. These examples indicate an important internal block; they do not give themselves permission to be successful.
Dr. Nathaniel Branden, a psychologist in Los Angeles, has originated and developed a wide variety of uses for the sentence completion process that we have adapted in principle here. He popularized the following sentence stem technique. Here's how it works.
Quickly, and without censorship, add ten endings to each sentence. Do not edit in any way. When you believe you cannot think of another response, invent an ending, no matter how unrelated. You can say your endings aloud, write them down, or save them in a tape recorder. The process enables you to explore your thoughts and feelings and will often tap into important emotional sources. The technique has almost universal application.
Try finishing these stems:
- Success to me means...
- If Mother saw me succeeding, she would...
- If Father saw me succeeding, he would...
- The good thing about stopping short is...
- If I didn't stop myself, I could...
Success for the individual depends not so much on pure skill as on self-confidence, the direct result of self-empowerment. You can release this energy by allowing yourself to accept the power given you from external sources.
Personal power comes from many sources:
- from symbols, such as a uniform or a badge.
- from personal associations, or family members.
- from the position held in an organization, which is power
granted from the top downward.
- from the people supervised in an organization who give permission to be governed, as the voters do. This is power granted from the bottom upward.
- from casting off limitations; you are an expert if you say you are and can deliver on your promise of expertise.
- from skills learned in the past, and the knowledge that you can do some things well.
- from learning new arts, techniques and accomplishments.
- from assessing our skills and abilities.
If you find it difficult to accept external power, overcome this reluctance by practicing in small, easy increments. For example, if someone compliments you on your dress, smile and say: "Thank you. I am glad you like it." If you say: "Oh, this old thing?" you downgrade both your choice and their opinion. With the former, you give the other person the power to compliment you and to express her opinion, and you empower yourself to make more successful choices. Didn't she confirm your good taste?
Self-generated power is also the knowledge that you can do anything you want to do. To women in Western culture, power sometimes has a negative connotation, and is associated with ruthless aggression. Actually, power is more closely related to influence or the ability to produce an effect or action, and is a component of motivation. The strength gained from self-empowerment can help transform your thoughts and ideas into activity directed toward your goals.
Polly A. was a homemaker until she was divorced. Shy and quiet, she enjoyed the background; she was always the loyal follower, never the leader. Financial need brought her into the work force. The only job she could find in the small town where she lived was part-time clerk at the library. Facing the pubic was terrifying to her, yet she knew she had to do it. She decided to focus on the books that were being checked out. She managed to say a brief comment about the book or books to each person. At first, she could not look the person in the eye. She was sure everyone knew her problems, and either pitied her or looked down on her.
Slowly, she noticed that her comments were appreciated by the readers. As she became more familiar with the library, she was able to make recommendations. Before long, Polly was the woman everyone came to for help. She accomplished this slowly, but she had empowered herself to try, and kept at it until she succeeded.
Self empowerment can be an important tool in finding appropriate solutions to conflicting circumstances. Research among the older population reveals data of a dual nature. First, people find great satisfaction in old age because they see the fruition of all their plans and dreams. They can stand back and admire their accomplishments, and, at the same time, continue to create and contribute. On the other hand a pattern of problems emerges in old age, including a reduction of income, changes in social roles and various health problems.5 Self-empowerment and awareness of these issues can help you develop the best solutions for you.
Retirement can be the beginning of a new dimension to life. When no longer confined to the structure of a daily job, a person is free to explore the surrounding world. The quality of that period of life will depend, in a large part, on planning.
