Numerous studies have shown that in America women control the majority of the wealth, and many believe that trend will continue as more women achieve greater professional success and attain increased economic power.
But for all the progress that women have made in terms of gaining financial clout, not much has changed in terms of their knowledge of and confidence about finance and financial planning since Cindy Hounsell set up WISER (www.wiserwomen.org), a nonprofit organization designed to help women, educators and policymakers understand the important issues surrounding women’s retirement income.
Hounsell, a former Pan Am stewardess, says she was one of many airline workers who knew nothing about financial planning and were taken by total surprise when the company froze its employees’ retirement accounts (and subsequently ceased to exist). She had the opportunity while studying law at Georgetown University to work on a project related to retirement planning. “That’s when I became aware of the statistics on women and retirement,: Hounsell recalls. “I was particularly horrified at the number of older women, many of them widows, who fall into poverty because of a lack of knowledge of and access to financial planning.”
She set up WISER in 1996 to educate women on the importance of taking charge of their financial planning needs and, most important, equipping themselves with the knowledge to do that properly. Although it’s been close to 20 years since she founded WISER, Hounsell often feels that she’s repeating the same things today as she did back then, because “there are still so many women out there who have no idea what Vanguard or Charles Schwab are,” she says.
That knowledge gap is reflected in studies such as one undertaken by Prudential Financial between 2012 and 2013, which showed that though women are more in control of their finances than ever, they are facing significant challenges with financial decision making. The survey, entitled “Financial Experiences and Behaviors Among Women,” revealed that only 23% of women of the 1,400 participants surveyed felt “well prepared” to make financial decisions, compared with 45% of men.
Today, men and women are in a more advantageous position than they were 20 years ago, Hounsell says, because the defined contribution world is extremely well organized. It’s very easy, she says, to navigate 401(k) plans “because the tools and technology these days are so well organized, so people can see exactly where they are.”
But getting people–women in particular, “even very smart women”–into a retirement plan is still a challenge, Hounsell believes, and a task for the entire financial planning industry, with respect both to Baby Boomers as well as to subsequent generations.
According to the recent 2014 Wells Fargo Millennial Study, that generation faces challenges with respect to financial planning. Many are just not saving enough, and there are stark gender differences, Hounsell says, with young women saving less than young men. The study also showed that Millennial women have lower financial literacy levels than their male counterparts, are less likely to have emergency savings, and are less likely to hold investment accounts, and that women are more likely to feel overwhelmed by their finances than men.
Hounsell would like to see a greater involvement from the financial services industry as well as from the government in helping to increase financial literacy and make involvement in retirement plans even easier than it is by simplifying things even further.
But as much as that’s important, WISER continues to encourage women to take the burden upon themselves–to become more financially literate, more aware of their financial positions and to work closely with financial advisors to set their financial goals.
The basic message hasn’t changed in the past 20 years, she says, and it’s not going to going forward, since “retirement income does not fall from the sky.” As such, the five pointsWISER deems key critical for women’s retirement remain the same. They are
1) Take charge of your retirement
Find out as much as you can. Talk to your spouse, find out about current and past employers, and check on your Social Security benefist.
2) Take advantage of retirement benefits available at your workplace
There is no better place to grow money then at work because of the tax advantages, and if your employer adds matching contributions, that’s free money. The sooner you start, the longer the money will have to grow.
3) Take time to educate yourself about Roth IRAs and mutual funds, long-term care insurance, and annuities
There is a wealth of information on the Internet, and investing a little time along with your dollars can make a big difference in your retirement security.
4) Take the first step to learn how much you will need to have a comfortable retirement
The big question is whether your guaranteed sources of income, like Social Security combined with retirement accounts and savings, will be enough for a comfortable retirement. Look at what sources of retirement income you can count on and what you can expect to receive from them.
5) Take the time to sound your own alarm. This is your wake-up call. Don’t put it off: Educating yourself will help you choose savings and investment tools wisely, and starting to plan now will give you more options later.