Anna Taylor repeatedly warns her daughters to think about their future, the distant future when they will be retired and possibly alone.
A widow for the past three years, Taylor, 58, knows statistics indicate that many young women will probably be alone someday because they remain single, divorce or become widows.
The Park Forest woman warns her daughters: “Look what I am going through. Do what you can to avoid this frustration.”
What Taylor wants her daughters to do is to pay attention to financial matters and begin a retirement fund that will help make their old age more secure, whether they are alone or married.
Experts agree that women don’t pay adequate attention to what’s going to happen to them once they retire.
Martha Priddy Patterson, director of employee benefits policy and analysis at KPMG Peat Marwick in Washington, D.C., and author of “The Working Woman’s Guide to Retirement Planning” (Prentice Hall, $15.95), said: “Women live about six years longer than men, and they earn less money than men. So right there, they should have a legitimate concern about how they will fund their retirement.”
Patterson advises women not be complacent and rely on the pension benefits of their spouse.
“You should talk over retirement planning and investments with your husband,” she said. “But don’t assume that because old Harry has a retirement plan, you have a retirement plan, because old Harry may be off with Fifi and you can be on your own.”
In her book, Patterson discusses 10 factors that make the retirement planning process different for females. Among them: Women change jobs more frequently than men, women tend to work in jobs less likely to have employer-provided retirement benefits, and women who do receive retirement benefits receive significantly lower benefits than men.
She also urges women to plan for retirement as if they were single, whether or not that is the case.
“The statistics just tell you that sometime during your retirement you are going to be alone,” she said, “and for many women they are going to be alone well before retirement.”
Alarmed that a 1987 U.S. Census Bureau report showed that more than 70 percent of the country’s elderly poor are female, Christopher Hayes, a gerontologist at Long Island University’s Southampton campus, founded PREP, a program for Pre-Retirement Education Planning that is funded by a grant from the U.S. Department of Health and Human Services.
Lynne Hickey and Janet Bolton, certified PREP instructors in the Chicago area, say that the two-hour seminars they conduct also draw many women who are recently widowed or divorced and reeling from new financial concerns.
Said Taylor: “I had a separate checking account, but my husband did all the investing. Women should share the responsibility for money management.”
Hickey said the PREP seminars start off with some basics of money management and are geared to helping women overcome their fiscal fears. Hayes hopes that women learn to establish a financial identity early on, so that in the event of widowhood or divorce they have their own savings and credit resources.
If a woman is working, said Patterson, she should participate in 401(k) or similar retirement programs if her employer offers such a plan.
“KPMG recently did a survey and found that 65 percent of employers with 200 or more employees offer a 401(k) plan,” said Patterson. “These plans will help women build a retirement fund only if they contribute some of the salary to the plan.”
Although some employers still offer defined benefit plans that do not require employee contributions, these plans are now in the minority, says Patterson.
When a woman’s employer does not offer a pension plan, or if a woman is a homemaker, then establishing an individual retirement account becomes essential, said Patterson. Women can deduct up to $2,000 annually from their taxable income if they put that amount in an IRA and if neither their employer nor their husband’s employer offers a qualified pension plan.
The IRA contribution is also deductible, says Patterson, if married couples filing a joint return have an adjusted gross income of $40,000 or less.
In fact, Patterson is so concerned about women not building adequate resources for their old age that she would like to see women establish an IRA even if they have pension plans at work.
“You can’t deduct your contribution from your taxes when your employer has a pension plan, but your interest is tax-deferred. That’s a good way to build savings,” Patterson says.
If a woman is a homemaker, she and her husband are allowed to contribute up to $2,250 annually into IRA accounts and enjoy the tax-deferred buildup of interest, and possible tax deductibility of the contribution.
“The extra $250 was added for the non-working spouse,” explains Patterson. “But there is no rule that only $250 can go into the woman’s account. In the book, I suggest that if a woman quits her job to care for the children she has with her husband, that $2,000 go into her IRA and just $250 go into her husband’s IRA account. The husband is probably continuing to build a retirement benefit through his job.”
The emphasis on independent retirement resources is meant to avert the risk that women face in losing pension benefits if they get divorced.
“One thing that women should know, and that is not generally well known,” said Hayes, “is that during a divorce a woman can negotiate to obtain part of her husband’s pension.”
A divorced woman is eligible to receive Social Security benefits based on her former husband’s earnings if she was married 10 years or more. That’s why, said Hayes, women who are considering divorce should wait until they reach that 10-year threshold if at all possible.
Patterson and Hayes agree that it’s also important for women to select a job with pension benefits in mind.
“Women who are looking for a job should be very cognizant of pension benefits,” said Hayes, who noted that “many women today are gravitating toward self-employment. In that case, they should establish a Keogh plan or other appropriate pension program for themselves.”
Seminar information
The Pre-Retirement Education Planning program (PREP) will hold seminars at Northwestern University on Oct. 16 from 9-11 a.m. and from 1-3 p.m. The cost is $25, which includes a handbook. Call 312-648-3431 for more information.
To order a handbook titled “Planning for Your Financial Future” ($11.95 plus $2.50 postage) or a kit consisting of the handbook and an accompanying video ($39.95 plus $2.50 postage), call the PREP project at 800-426-7386.
To find out when future seminars will be held in the Chicago vicinity or to be placed on the mailing list for the newsletter from the center, you can call that same 800 number or write Life Planning for Women, P.O. Box 1260, East Quogue, N.Y. 11942.
