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| Savvy Investment Matters for Her |
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At some point in your life you will be alone. Whether because you choose to remain single or get divorced, or because you become widowed, 90% of women will be alone at some point of their lives—and totally responsible for their own financial welfare.1 You need to be ready to take control of your situation, ensuring that your money matters are sound today, as well as tomorrow. Are you prepared?
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Keep Your Financial House in Order
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Make no mistake about it, you control trillions of dollars. Yet, you probably don't even know it. You have the discretionary and disposable income to buy whatever you want. However, are you:
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Getting the most out of your investments? |
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Taking advantage of all the opportunities available to you? |
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Investing appropriately based on your current life stage? |
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Making sound decisions that will afford you financial security today and financial freedom in retirement? |
In previous generations, if there was a man at the head of the household, he was usually responsible for making all of the family's financial decisions. In fact, in some cases, the woman wasn't even aware of how or where the family's savings were invested.
Fast forward to today. Studies repeatedly show that you have made tremendous strides in terms of being more actively involved with the family finances. This has empowered you to take advantage of the many opportunities available to help achieve a secure financial future.
You'll see how you can take a more active role with your finances and how your role may change as you enter new phases.
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Take Control of Your Finances
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Studies have shown that there are several common challenges you face when it comes to financial security. Understanding and proactively working with a financial advisor to overcome these challenges can go a long way.
Put Your Needs Before Others
Whether it's due to temporarily leaving the workforce to raise a family or to care for an elderly loved one, many women are financially penalized for putting the needs of others before their own.
You are more likely to cut back on your hours of employment to meet family needs, and work interruptions can have significant financial consequences. For instance, women's contributions to Social Security cease when unemployed, ultimately reducing their Social Security benefit when they retire. According to the Social Security Administration, the average monthly Social Security benefit paid to retired workers in 2004, was $1,076 for men and $826 for women.
Remember, focus on taking care of yourself first and make saving a priority. Develop an investment strategy and stick with it. Consider investing more to make up for lost time and try and save even a little if you are not working.
Save for Retirement
As a result of shorter careers, you have less time to accumulate a financial nest egg and save for retirement through your company-sponsored plan, such as a 401(k). This can be a significant issue, as you could need 80% or more of your pre-retirement income when you leave the workforce to maintain your current lifestyle. Your ability to increase your retirement savings can be substantially enhanced by putting aside money for retirement now, rather than later, to reap the benefits of compounding.
Take More Risks
Women tend to be more risk-averse than men. Therefore, it's not surprising that, overall, you are more conservative when it comes to investing. This is not necessarily a bad thing. You are more patient and you hold your investments longer. On the flip side, investing too conservatively could endanger financial security by not providing adequate resources. It's important to understand that certain investment risks may be necessary to achieve financial goals. Don't limit yourself to conservative investments such as money market accounts and CDs. Use asset allocation to diversify your portfolio.
If you are a conservative investor, remember that over the long haul, equities/stocks can help your portfolio grow. Generally, the longer your time horizon—and women tend to outlive men—the more of your assets should be invested in stocks.
Trust your instincts. Conduct research, invest consistently, and be don't be afraid to ask for help from a financial advisor. All-female investment clubs tend to receive higher returns than all-male groups. The reason? Generally, women don't try to capitalize on short-term market gains. Men do.
Source: MPI Stylus. The Russell 2000® Value Index is an unmanaged index that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock-market performance. The Lehman Brothers® (LB) Government Bond Index is an unmanaged index comprised of all publicly issued, nonconvertible, domestic debt of the U.S. government or any of its agencies, quasi-federal corporations, or corporate debt guaranteed by the U.S. government. The Merrill Lynch 3-Month T-Bill Index is an unmanaged index that measures returns of three-month Treasury Bills. The Merrill Lynch 3-Month T-Bill Index is unmanaged, is not available for investment, and does not incur expenses. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is not possible to invest directly in an index.
Know Your Target
You know you need to put money aside for a rainy day. But are you saving enough? According to the 2006 Retirement Confidence Survey, only 13% of women believe they will need to accumulate $1 million or more for retirement. While this may sound like a large sum, when you consider that your retirement could last 30 years or longer, plus the impact of inflation and taxes, you could outlive your savings.
A conservative rule of thumb is to withdraw 4%—or one twenty fifth—of your retirement nest egg during the first year of your retirement. Adjust subsequent annual withdrawals to compensate for inflation and you should not outlive your money.
* Assuming current salary increases of 1.5% each year until age 65. **Social Security income of $19,380 based on Social Security Adminstration data plus a hypothetical income of $25,213.
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Get Organized
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Regardless of what stage of life you are in or whether you are married or single, knowing where key documents and statements are is important. While it's easy to understand the need to track these essential materials, there is a seemingly endless list of daily priorities that get in the way of putting this on the "front burner." Unless you know how and where your finances are organized, you will not be able to review your savings plan regularly.
MainStay's LifeFolio Checklist can help you list and track important documents, their location, and other relevant contact information. It is an easy-to-use management system that helps inventory your personal data and important documents, together with the names of your key contacts, all in one convenient place. The LifeFolio Checklist will help you organize the key aspects of your life.
What Is Your Life Stage?
In addition to the common challenges facing women, there are other issues a woman may face based on her particular life stage. Below is a summary of various life stages, the associated challenges, and the opportunities that are available to overcome those challenges.
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Build Your Financial Support Team
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You may have already discovered the importance of working with a financial advisor to develop a personalized investment plan. As you move through the various stages of your life, remember that your financial advisor is a valuable resource. He or she can review your financial needs on an ongoing basis and recommend adjustments as your circumstances change.
You Are In Charge
Compared with just a few years ago, many women have taken a much more active role with their finances. To continue making the most of the opportunities in the investment markets and to overcome ever-changing challenges, it's important to proactively take even greater charge of your financial future. Be sure you're comfortable with the support you receive from your financial advisor. As your needs change, it may be necessary to identify a new financial advisor to help you seamlessly progress through your various life stages.
As your life stages change, you may require more sophisticated advice, especially as your goals evolve and become more complicated. The checklist on the next page can help when considering whether a particular financial advisor is a good match given your individual needs.
Questions to Ask When Looking for Financial Advisor
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Do they come highly recommended? Ask for five references—three from current clients and two from professionals. |
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What is their financial philosophy? |
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What is their approach to planning? |
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Are they part of a team? If so, do they have specialists covering different financial areas (i.e. retirement, college planning, estate planning, etc.)? |
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What is their certification? |
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Do they have the experience to serve as the lead coordinator for your entire financial team (i.e. your accountant, tax advisor, etc.)? |
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What type of training have they had? |
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What services and products do they offer? |
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What is the final product that will be produced for you? |
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How accessible are they? How often can you expect to meet with them? Quarterly, bi-annually, annually? Would this be in person, over the phone? |
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What are the costs and fees associated with working with them? |
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How they are paid? Are they compensated on a fee-only basis or by brokerage commissions? |
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The preceding information has been provided for informational purposes only. Neither New York Life Investment Management nor its representatives provide legal, tax, or accounting advice. Please contact your own advisors.
Securities are distributed by NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, New Jersey 07054.
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