Thursday, November 4, 2010

You're a Boomer, Remember?

I often post here, generalizing on the Boomer as a single entity. Yet Boomer women face some greater challenges. And in many instances, it is the approach financial planners take that makes all the difference.

Douglas Wolk writes about comics, not retirement planning, women or independence. Yet, sometimes, quite by accident, the world of the comic book becomes a portal into a world we think we know, or better, wish we knew better. Writing in this past Sunday's NYTimes Book Review, he suggested: "There’s nothing quite as creepy as a creepy drawing: almost real, but just wrong enough to suggest it’s wearing only the torn-off skin of reality." Perhaps, unless we are considering retirement. It offers the same creepy look at our own mortality.  The question is: who is better at realizing what lays ahead, men or women?

There was a survey published recently focused on women and ultimately, how to sell them the same products that men seem so eager to purchase. The process of meeting with someone who knows about finances is filled with potential (from a man's perspective) and more often than not, trepidation (from a woman's).

Exercising caution is a natural reaction for women of all ages as they approach most of the decisions they make. They seem to be gifted with the ability to see just a little further down the road than men and when it comes to finances, this sort of foresight can be especially difficult when financial professionals are attempting to sell them the products that are supposedly well-suited for both sexes.

I have often pointed out that one of the greatest dangers facing women of any age is not their ability to manage their finances. Most understand the need to exert control over the money they earn. The outside influence on how well they do this and the danger they face in making the wrong move is often the result of the men in their lives.

Couples often visit a financial planner together. And financial professionals play to that image in their ads, depicting women in an almost antiquated role of dependent on the success of their husbands, he with arms wrapped around her, providing protection. This is not how women see the world unfortunately and financial professionals, by playing to this stereotype, are alienating the very segment of the population they need to work with the most.

Women, according to the latest survey done by yet another group looking to identify away to tap this group, are not as dependent on their husbands as these financial pros believe. But, at the same time, they must deal with the repercussive effects of how men handle the family finances, the stereotypical approach they often take with those decisions and the role men play in the long-term financial health of women.

If you are a Boomer woman, in the plus fifty range, you have a much greater likelihood of having grown up with the notion that a man was the ultimate protector of your fate, your future and your financial prosperity. Younger women have found, perhaps through trial and error or simply through the power of observation that this is not and should not be the case. Yet when faced with a financial decision, one that could impact them in retirement, women still turn to men for advice. And men fall quite comfortably into that role even if they don't have a clue.

So why do men fail women when it comes to money? We tend to be narrow-minded thinkers - I'm generalizing of course. But we look at the target rather than everything that can play a role in hitting the bull's eye. A man is more likely to see the goal as something that is down a long, straight line. Women know that life is a series of twists and turns and wonder why financial products don't offer these sorts of flexible options.

Flexibility in financial planning relies on the ability to juggle numerous options that decentralize the nest egg - a term that I find increasingly annoying. There is no nest and in many cases, the concept of an egg waiting to hatch portrays exactly this sort of anticipation that good things will happen. They sometimes do. But you need to know what's going on is what you planned to happen and not something left to chance.

There are basically four things you need to consider for a healthy retirement and if your financial planner isn't addressing each of these, you need to find one that will.

First is debt. Nothing draws down your finances faster than servicing something you borrowed money to have. Women are more likely than men to understand this concept.  But men are more likely to assume debt based on their belief that they are in a good financial position. And when are they most commonly feeling this way: when they see how much they have accumulated for retirement and feel good about it.

Two, a financial planner will in most instances, lump insurance needs into one basket. Even if you are both covered by Medicare, the cost of your financing your health in retirement has been estimated at about $200,000 per couple. This "lumping" of different insurance needs, or worse, underestimating those needs is a mistake that should be easy to spot yet is often overlooked. The cost of insuring a working woman is statistically higher than that of a man. Why would you consider those costs differently when planning for retirement, which often leads to not enough insurance in place for the person most likely to live the longest?

Three, taxes and inflation get more complicated and confusing in retirement. Most folks don't anticipate the tax rate of working well into retirement and simply figure they will add value to their retirement income by remaining in the workforce. Depending on how much you are drawing from your retirement accounts, almost half of what you earn can be taxed. Men, who tend to be more optimistic - acting in the role of assuring spouse, often overlook the effect of inflation as well, which will have a greater impact on their longer living spouse. Your financial advisor should be addressing this while you are working.

Four, consolidation of accounts is a typical mistake.  In some instances, it might seem like a good idea. But once again, it is that misguided nest egg notion that allows this to happen. A good financial planner will suggest numerous accounts distant enough from each other to prevent one from impacting the other. Women and men have an increased chance of cross-over investing during their work years (something I addressed a couple of days ago) and as a result, increase the risk in those investments. Keeping accounts separate, diversified and complimentary is key to keeping them safe from a single disaster.

And that disaster, as it was pointed out recently in the NYTimes, can come from your own inability to handle your finances due to dementia. A good financial planner will involve the children in this account structuring as well and in doing so, enable them to review how well the plan is progressing once you enter retirement. Men might balk at this notion. But it is a prudent and wise move and women should insist they know.

Paul Petillo is the Managing Editor of and a fellow Boomer.

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