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Good afternoon! The AARP thought this would be
the right time for you to meet someone who can
give you a first-hand, personal account of what it’s
like to be a woman “of a certain age”…someone who is
facing their older years, possibly alone, but with
courage…someone who could be your mother or your sister
or your best friend.
Well, here I am.
Honestly, I think I was more shocked than anyone when
the AARP asked me to wrap up this portion of the conference.
I suspect it’s obvious - even to the most casual observer
- that, as a spokesperson for the financial issues
faced by mature women, I am demographically challenged
in more ways than you can possibly imagine.
But I can speak to you with some authority about one
particular woman - a woman who enormously influenced
my attitudes on this subject - and who really helped shape
who I am.
In the year 1928, twenty-three year old Penelope
Maliaros boarded a steamship in her native Greece to set
out for a new life in the United States. In America, she
married and raised a family, three daughters in all. Shortly
after her 39th birthday, her husband fell ill and died. The
young widow took to wearing black clothing, both at home
and in public. Throughout her entire life, she never remarried
and she never wore anything but black.
After she turned 60, she no longer was able to run the
little candy store that provided her modest livelihood. Fortunately,
she was invited to come join the household of her
middle daughter - my mother. I was born that same year -
the year grandma, or Yia Yia as we called her, came to
live with us.
No one can ever tell me that the retirement years cannot
be as productive, or as fulfilling or as important as all
the years that precede them. After she was given this
second opportunity to help raise a family, my grandmother
lived an entire second lifespan. She was there for me
throughout my childhood and virtually all of my adulthood.
We never felt as though bringing her into our midst was
an act of charity or obligation. You see, my grandmother
knew how to make herself an essential - maybe even the
most essential - part of the household. She was always
busy, busy, busy ... getting up at five in the morning to
bake bread ...doing yard work that would break the back
of a person half her age ... even taking the time to show
my brother how to catch fish with hard little balls of dough
left over from her pie crusts.
She was always too busy caring for us to spend even a
moment feeling regret.
Yia Yia passed away two years ago. She was 98. The
years I had with her are precious - and I wouldn’t have
chosen to grow up any other way.
But later in life, I realized that she really never had
another choice. She had no retirement safety net. No
way to support herself and live independently. Fortunately,
she had children - and grandchildren - who loved her and
provided her with a secure, dignified retirement.
Not everyone is so fortunate. As you know, women
face far greater financial risk during retirement than men.
There are a number of clear reasons for this.
First, there’s life expectancy. Women live longer than
men. Nearly one-third of all women who are age 65 today
will live well into their nineties. Within our lifetimes,
the number of American women over age 85 is expected
to double and possibly even triple.
And the men? We’re beating the odds if we barely
survive our seventies. So, even though the majority of adult
women are married, 85% of them will spend the last years
of retirement alone. In fact, the average age of becoming
a widow is 55. That’s right, 55 years old.
And that raises another significant challenge: All too
often, widowhood spells financial disaster for women. According
to the U.S. government, four out of five widows
living below the poverty line were not poor before their
husbands died. You already know the story. He might have
had a decent pension from his job, but now that he’s gone,
so are the monthly checks. To add insult to injury, even
her Social Security benefits will be reduced: they will now
reflect the contributions of just one wage earner instead
of two.
Now, some might assume, given the greater number of
women who entered the workforce over the past forty
years, that many of them should now be approaching retirement
with nice pensions, well-funded 401k accounts,
and all the other financial resources they need. But the
fact is, even among baby boomers, women are less likely
than men to work for an employer who offers a retirement
plan.
And because they are more often the ones to leave jobs
to care for children, these women are also less likely to
vest in pension plans or contribute as much as men to retirement
savings plans.
In fact, women who are currently eligible for pensions
receive, on average, only half the pension amounts of their
male colleagues.
Here’s something you can try next time you’re sitting at
a computer: Log onto Amazon-dot-com and type in the
words, “women and money.” That search will turn up more
than four hundred books on the subject. Books with titles
like, “Prince Charming Isn’t Coming — How Women Get
Smart About Money.”
Now, conduct another book search, this time for “men
and money.” Guess what? You won’t even find half as
many volumes. But you’ll love the titles: “Men, Money
and Power.” “The Money Men.” “The Wall Street Warriors.”
At any rate, there’s a good reason why so many more
personal finance books are being written for women. These
books are filling an information void that has been created,
in part, because the financial services industry has not done
a better job of working with women.
I spend a good amount of time talking to people about
saving for retirement. And it is often true that men and
women do have different takes on this subject. Just to give
you a few examples:
Remember the saying that was popular a few years
back: He who dies with the most toys wins? When it
comes to retirement assets, some men really do believe
that. Hey - my assets are bigger and worse than your
assets. My stock picks are hotter than your stock picks.
Investment is a game, and, for many men, the point of the
game is racking up the most bragging rights.
Women, on the other hand, tend to focus on the quality
of life they hope to achieve in retirement and ask how
much it will take to sustain it. In other words, reliability
matters. It’s about having something you can count on.
Another example: men like to be in the investment
driver’s seat, making all the decisions and calling all the
shots. No wonder some financial planners prefer male clients:
they really aren’t looking for advice, just lots of affirmation.
For women, the issue is not about how much time
they spend with their hands on the wheel. It’s about getting
everyone to the destination safely and securely
O.K. maybe I’m stereotyping a little...well, maybe I’m
stereotyping a lot... but I’m doing this to make a point: the
financial services industry needs to understand women
better in order to meet their needs... and there definitely is
a need here. Financial planning for retirement is - by definition
— a women’s issue. The numbers don’t lie: by age
85, there are twice as many women as men. And they
need to be planning well in advance for their economic
self-sufficiency.
Everyone is still talking about asset accumulation, which,
of course, is what we should all be doing during our working
years. But once you retire, it’s no longer about accumulating
assets; now you need a plan for spending and
preserving assets. Along with that plan, we need to be
providing much better answers to the four big “what if”
questions women are asking about retirement:
- “What if I outlive my money?”
- “What if my investments lose money?”
- “What if I have expensive medical bills?”
- “What if inflation eats up my savings?”
There are many ways people try to ensure financial
solvency throughout retirement, but the most common
approach - the one you read about every week in financial
advice columns — is one I call the “do-it-yourself
plan.” I call it that because it gives you full responsibility
for figuring how much you need to save before you retire
...determining a suitable investment strategy to reach that
goal ...and then, once you retire, disciplining yourself to
withdraw only a prudent amount - say, four percent of
your nest egg per year - to live on.
This can be a workable plan - and for those who have
generous defined benefit pensions and substantial savings,
it might even be the preferred plan. But for most of us, the
do-it-yourself plan has a few significant shortcomings.
If you live longer than you expected, you could be in
serious trouble.
If your investments don’t do as well as you expected,
you could be in serious trouble.
And if you live to be really old and your investments go
really far south, you absolutely are in serious trouble.
The problem is, no matter how skilled you are at managing
your finances ...and no matter how smart your investment
advisors might be ... the do-it-yourself plan does
not come with a lifetime guarantee. And when we are
looking at retirements thirty years or longer, people absolutely
need a source of guaranteed income that they cannot
outlive.
But here’s what I find really frustrating:
There are financial products that address this issue.
These products have been available for years.
And yet, less than 15% of the baby boomer generation
is using them.
Very few people realize they can convert a portion of
their retirement savings into a guaranteed stream of
monthly income for life. We are now seeing the introduction
of new financial tools that are built upon the principles
of pooled risk and annuitization and which provide a secure
buffer against the financial consequences of longevity.
These guaranteed lifetime income products offer the
tremendous reassurance of knowing that regardless of how
long you live ... and regardless of the ups and downs of
the markets ... you will continue to receive the monthly
income that has been promised you.
This can be a particularly valuable component of a retirement
portfolio for women for a couple of reasons:
- First, it can replace the guaranteed monthly income from
pensions and Social Security that’s lost when a spouse dies.
- Second, it has none of the volatility risks of investments,
and yet usually yields much greater annual returns.
- And, third ... let’s face it; these guaranteed lifetime
income plans provides the greatest benefits to those who
live the longest ... in other words, women.
I recently read an interesting observation made by someone
who presumably understands more about investing
money than anyone on earth: Warren Buffet. What he
said was this: “It does not take extraordinary action to
achieve extraordinary results.”
Fifty years ago, there was nothing extraordinarily difficult
about building a sound retirement portfolio. Perhaps
you had some money put aside in nice, safe blue chip
stocks - say, like TWA or Penn Central or maybe
Studebaker. But even if your investments didn’t perform
quite as well as you expected, you still had the guaranteed
income portion of your retirement portfolio: a Company
pension and a Social Security account.
Today, too many retirees are regretting their reliance on
what they believed were “nice, safe” investments. Unfortunately,
the guaranteed income portion of the portfolio is no
longer the backstop it used to be. Only two in ten U.S. employees
are currently covered by company pension plans.
Thank goodness for Social Security: for some older
Americans, this is the only reliable source of income remaining
for them.
Clearly, it is time to place a renewed emphasis on the
guaranteed income piece of the retirement portfolio.
People need simple, safe ways to protect themselves
against outliving their assets. So, why aren’t guaranteed
income solutions the number one topic in every retirement
planning discussion?
Maybe this topic just doesn’t push the right buttons for
men.
Think about it. When you contribute to Social Security
or purchase a lifetime income annuity, you surrender control
of a portion of your money. It goes into an enormous
pool with lots of other cash, and you no longer have any
say in how it’s invested. How frustrating is that?
I think some men are also put off by the fact that this is
a passive experience. Instead of the thrill of day trading,
you only get the satisfaction of watching those checks
arrive in your mailbox every month.
And while it’s nice to have security, you lose the opportunity
to be a hero. Everyone gets the same return. You
don’t get to brag about outsmarting the market.
Well, maybe it’s time for all of us to adopt some new
perspectives.
As we plan for our retirements, none of us should be
expected to go it alone. The participation of credible, qualified
advisors is absolutely essential.
What’s more, none of us should be asked to bet our
retirements on how well our personal investments might
be performing decades from now. Every retirement plan
should include guaranteed income that the markets can’t
erode and that retirees can’t outlive.
It all boils down to a very simple truth: By pooling the costs
of longevity risks among all of us, we can afford to insure
against financial devastation undoing any one of us.
That’s what Social Security does and what corporate
pension plans, up until recently, delivered.
As a society, we need to agree that there are some
promises that should never be broken. A dignified, secure
retirement should top the list.
I’m an insurance guy. I certainly don’t claim to have all
the answers to the public policy issues surrounding retirement.
But I do know that there are viable solutions to the
challenges of lifelong income security. Solutions that are
actuarially sound and that work in the real world.
However, getting people to adopt those solutions...and
making them available to greater portions of the population
... is a far larger task.
It will require the cooperation of people in my industry,
working together to come up with retirement income products
that are more widely accessible. It will require the
support of legislators, who can help foster the education
and incentives needed to convince more people to plan
ahead for their futures. It will require the involvement of
all of us who care about what retirement holds in store for
our mothers ... our grandmothers ...and ourselves.
We have the understanding, the financial tools and the
resources to restore the retirement promise.
Whether this means encouraging people to begin saving
a few dollars a week early in their careers ... or building
their own personal pensions later in life ... none of this
is impossible. None of this is beyond us.
Or as my Greek grandmother might have said to me:
“If you give someone a fish, you feed them for a day. But
if you show someone how to bait a hook with a scrap of
piecrust, then - stin yasou!
- we’ve all got something we can really celebrate.”
Thank you!
DISCLAIMER: New York Life Insurance Company is providing this article as a courtesy. The material is intended for general informational
purposes only. Individuals should evaluate their own personal situation and needs before making decisions regarding their
retirement income.
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