MONEY matters

In a recent survey by Fidelity Investments, 500 couples were asked about their plans for retirement. The survey targeted couples near retirement or those who had already retired.

What the survey revealed was that although many couples work hard in the savings aspect of retirement – they do a very poor job at communicating with each other about their individual goals, dreams and expectations around retirement.  Since they hadn’t previously discussed it, a large percent of couples reach retirement age without having decided on the big questions like where to live or at what age to retire.  

We’re only three weeks into the New Year and hands down, almost every potential client I’ve spoken with so far is concerned about one thing and one thing only - retirement planning. More specifically, they want to know, based on their current financial picture, if they’ll be able to maintain the lifestyle they desire when no longer working for money. That, ladies and gentlemen, pardon the cliché, is the $6 million dollar question on many a boomers mind these days.

Where most of us do really well is on understanding and executing on the accumulation phase, such as saving and investing X amount in your IRAs, 401ks, 403bs, each year. We get that concept. Where things become murky for many people is when you get to the income distribution phase of retirement planning. This is when you need a long-term strategy to fill the gap between your social security and possible pension payments and your lifestyle expenses. To do that, you ask the following questions:

• How much can you safely withdraw each year from your investment portfolio?
• What’s the rate of return you’re assuming with your portfolio? 
• How should you develop your investment strategy?
• Do you withdraw your cash monthly, quarterly or once a year?
• Do you withdraw the same amount each year or will it depend on your investment returns?
• What’s the defensive strategy to preserve your capital if inflation starts to increase rapidly?  

According to the Transamerica Center for Retirement Studies, a measly 8% of employed women feel they are building a sufficient retirement fund. One of the main reasons for this is that women aren't talking about retirement planning.

So to remedy the problem, and based on it's research, the Center for Retirement Studies came up with some questions that family, friends and advisors can ask women to get them started with talking about retirement.

Can you guess the average age at which we are at our mental sweet spot?

This is the time of year people often start thinking about getting their financial house in order. So if creating a personal financial plan is on your list as a personal and financial goal to accomplish in 2012, you won’t be alone.  As you survey the landscape of fee-only financial planning options available, keep this in mind;

Creating and implementing a comprehensive financial plan that

• optimizes your cash flow and investments;
• aligns your money with your values;
• provides you a smart and strategic financial roadmap that’s easy to understand and implement;

Are you planning on a miracle or planning for success in 2012?

When considering the retirement alternatives out there - people are getting more and more creative in their thinking. Karen DeMasters outlines some other options you may not have considered, including what is known as a '"transitional strategy', in an article she wrote that appeared in the most recent Financial Advisor magazine.  

In laying out a case where when approaching retirement, one has to balance both time and money, the article states, "T. Rowe Price believes that even if you both work part-time in your 60's while you begin playing, the financial benefits may be significant, or, in some cases a couple may choose to have one spouse retire while the other continues working."  It's not often you read an article about retiring with the phrase 'funding your fun' in it.

I'm not saying it's fair, not by a long shot, but these are some facts about women in the workforce:

• On average, women make less money than men - 77 cents on the dollar
• Women contribute less to retirement plans like IRA’s and 401k’s and less to Social Security during the course of their work lives
• On average, women work 12 years less than men (by taking time off to raise kids or care for elderly parents)
• Women generally don’t have a pension since pensions require length of service and women often take time off to raise kids or care for parents
• Women live 5-7 years longer than men, so they’ll need more savings when retired

Being Proactive and Planning for a Successful Retirement

Women who take charge, do the math, plan for contingencies and work with their partners and/or financial planners have a better chance of securing their finances in retirement than those who shrink from the process, according to a new study.

The MetLife Study of Women, Retirement, and the Extra-Long Life: Implications for Planning, shows women face a number of unique financial risks—including outliving retirement funds, aging single, lower retirement incomes, greater health care costs and added care-giving responsibilities—and have not planned adequately to address these concerns.

Slightly more than half of the women surveyed know the likely amount of their retirement income/assets and only 44% have calculated the amount of their essential expenses, according to the study. Approximately one-in-six (16%) reported that they have or plan to delay retirement, on average, four years.

The data suggests that women who work collaboratively with spouses, partners, financial advisors and even knowledgeable friends, report higher confidence in their retirement security. Among men and women, men are more likely, by a margin of 65% to 55%, to calculate retirement income.

"The combination of risks for women and their relatively inadequate retirement planning has become known as the ‘perilous paradox,' but the message is clear that women are able to avoid that," said Sandra Timmermann, director of the MetLife Mature Market Institute. "The risks and costs of ‘living long and living female' call for an ‘affirmative action' plan. We find that those who plan for a steady stream of income, along with some flexibility for the unexpected, are best prepared for what can be an extended future."

Longer life spans for American women create additional costs and financial constraints that can lead to greater financial challenges in retirement, according to the study. As of 2009, women aged 65 years or older had significantly lower annual retirement incomes than men—an average of $21,500 vs. $37,500. American women are more likely to experience retirement alone since many never marry or are widowed or divorced.

Retirement Planning-Taking the Next Step

If you’re like most people, (both men & women) the thought of developing a comprehensive financial plan that provides you a clear and easy to understand roadmap of your retirement income is easier said than done.

Yet the sooner you know where you stand and how best to move forward, the sooner you’ll enjoy the benefits and peace of mind a solid financial plan brings to your life.

Fair/Not Fair Photo by Xuoan's Dailies

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