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Financial planning important for women, advisers say

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By Pamela Yip / The Dallas Morning News


Elizabeth Zedaran kept track of the checkbook and paid the bills during her 26-year marriage. She considered herself fairly astute when it came to the family finances.

But when her marriage fell apart, she found out just how little she knew about planning for her financial future.

"I was 90 percent left in the dark on financial things," said Ms. Zedaran, 43, now a Dallas licensed marriage and family therapist. "I'm talking about the implications of investing, the implications of financial planning."


Financial planning important for women
While men and women share the same concerns and needs when it comes to planning for their financial future, women have unique characteristics that make it even more crucial that they begin to take stock of their financial lives, experts said.
• Women and investing


While more and more women are learning about investing and personal finance, too many still defer to their husbands or significant others when it comes to money matters, leaving them exposed if the relationship shatters or their partners die, financial advisers say.

Single women aren't exempt. Many of them haven't considered that they have to plan for themselves.

"They just don't stop to think, 'How am I going to care for myself in a financial way?' until the wolf is at the door," said Joan M. Gruber, a certified financial planner at Joan M. Gruber Advisors in Dallas.

It's imperative for women to be involved in financial planning, experts say.

Peggy Everson, a certified financial planner at American Express Financial Advisors, agrees.

"It can give them some peace of mind, knowing that at some point in their life, they can be financially independent," Ms. Everson said. "They can make different choices and know that they have the money to be able to do that."

While men and women share the same concerns and needs when it comes to planning for their financial future, women have unique characteristics that make it even more crucial that they begin to take stock of their financial lives, experts said.

For example:

•Women tend to live longer.

•They don't earn as much as their male counterparts.

•They often take several years off to care for children or elderly parents.

•And, as a result of lower wages and more time off, their retirement income is greatly reduced.

"Nine out of 10 American women will be solely responsible for their finances at some point in their lives," said Boni Callaway, manager of investor education at Invesco Funds in Denver, a mutual fund firm.

That's because women tend to outlive men by an average of seven years, which means they must save a higher portion of their incomes so they don't outlive their money.

Earning gap

In addition, women earned only about 76 cents for every dollar that men earned overall in 1999, according to the U.S. Department of Labor. That can result in a dire situation for many women in their old age.

"A lot of women have this ... complex that they're afraid they'll end up being a bag lady," Ms. Everson said. "It doesn't matter how much money they have."

And there may be a good reason that women have that fear.

Women make up more than two-thirds of impoverished Americans 55 and older. And that percentage only increases in the older age brackets, according to the U.S. Census Bureau.

Several circumstances may contribute to that.

Half of all women work in traditionally female, low-paying jobs without pensions, according to the Women's Institute for a Secure Retirement in Washington, a nonprofit organization that educates women about retirement issues.

Three out of four working women earn less than $30,000 a year and nine out of 10 earn less than $40,000 a year, the institute said.

Ms. Zedaran said that when she was married she worked at various low-paying jobs, none of which offered retirement benefits.

"We moved for his career," she said. "I did not have a directed career, so wherever we moved I tried to get a job. "I was not able to get promoted to build a lot of experience."

And when they're fortunate enough to have a pension plan, women retirees receive only about half the average pension benefits that men receive – about $4,200 annually, compared with $7,800 for men, the organization said.

Part of that is because many women leave the workforce and interrupt their earnings stream to be a caregiver.

The cost of caring

The average woman spends 15 percent of her career out of the paid workforce caring for children and parents, according to the Women's Institute for a Secure Retirement.

That caregiving extracts a high price financially.

Caregiving costs individuals more than $659,000 over their lifetimes in lost wages, lost Social Security and pension contributions because they take time off or leave their jobs entirely.

As a result, they miss opportunities for career training, promotions and plum assignments, according to a 1999 study by Metropolitan Life Insurance Co., the National Alliance of Caregiving and the National Center for Women and Aging at Brandeis University.

"Caregiving for parents is grossly overlooked," Ms. Gruber said. "Planning for caring for parents – nobody is planning for that."

She advised women to consider buying long-term care insurance on their parents that would help pay for caregiving.

Taking time off to raise a child also hurts a woman's financial position.

For every year a woman stays home caring for a child, she must work five extra years to recover lost income, pension coverage and career promotion, according to the National Center for Women and Retirement Research in Southampton, N.Y, which studies women's retirement issues.

If a woman knows she will stay home after having a child, she and her husband should plan for that financially.

"If they know that they're going to get down to one income, I recommend that they start saving," Ms. Everson said, adding that the couple should set aside the woman's salary. "That allows them to build an additional cushion if an emergency happens, and it will also allow them to see if they can live on one income."

But if a woman has debt, she should pay as much of that off as possible before starting to save, she said. "If they have debt, get rid of it," Ms. Everson said.

Dealing with divorce

One situation that women don't and can't plan for is divorce, which can be financially devastating.

One year after divorce, the average woman remains single with an average income of $11,300, according to the National Center for Women and Retirement Research.

In fact, a woman's standard of living can plummet 10 percent to 25 percent after divorce, said Carol Ann Wilson, a certified financial planner and founder of The Institute for Certified Divorce Planners in Boulder, Colo. The center trains advisers on how to calculate the financial effects of divorce.

Women, married and single, need to know their legal rights and what they're entitled to, experts said.

"Nobody plans for divorce, but a woman should see a financial counselor while she is married to see what her net worth is, to see where she stands Social Security wise and investment wise," Ms. Zedaran said.

Married women also need to establish a financial identity separate from their husbands, financial advisers said.

"Have credit in her name," said Debra White Stephens, a certified financial planner at Financial Network Investment Corp. in Houston.

"That's very important because once she divorces, if she needs to purchase a new residence or needs to borrow money to finance her transition, she's not going to be able to get it unless she has some credit."

Just ask Ms. Zedaran.

"I just did that in the last four years," she said. "When I first separated, I thought, I'm going to have to buy a new car when I get a divorce. How am I going to get a loan when my credit history is tied to his and I don't have a credit card in my name?"

Disability insurance

Another contingency working single and married women need to consider is disability and how it will torpedo their greatest asset – their ability to earn a living.

Because they live longer than men do, women are more likely to become disabled than men, said UnumProvident Corp. in Chattanooga, Tenn., the largest seller of individual disability insurance policies.

"In the older population – people over 85 – more than half of them have activity limitations or are prone to a disability," said Todd Womack, UnumProvident spokesman. "The older you get, the better your chances of suffering a disability."

Having adequate disability insurance is especially crucial for single women because they don't have a second income to back them up if they become disabled, financial advisers said.

Whatever the circumstance, women need to start thinking of themselves as individuals, experts said.

"Women take for granted that this Prince Charming is going to take care of them and that it's all going to be nice and rosy," Ms. Callaway said, adding that it's important to start planning now.

"You don't have to have a degree in economics. It's not rocket science. You need to know enough to ask good questions."

Pamela Yip covers personal finance for The Dallas Morning News. If you have a story idea, e-mail her at pyip@dallasnews.com.


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