Investment management for women: you've got to understand your money

By Patricia Faginski Assistant vice president-client services St. Germain Investment Management What makes investment management different for women? Consider the following: * Women typically earn less than men. * Their retirement resources (401k or pension) are typically smaller. * Women tend to live longer than men. * Some studies show that 80 percent of married women outlive their husband. * Oftentimes, savings are depleted on the husband's health care in the final years of life. * According to AARP, the average age that a woman becomes a widow is 56. When you couple these factors with the reality that women are often less involved with the family finances and financial planning than men, you can see that there are some gender-specific issues you need to address in preparing for your financial goals. Managing your money now, and later What specific financial issues do we often need to address when we sit down with women? First and foremost, we tell them they need to get involved in the financial planning process. Do they understand how their current money and payments are being allocated? What expenses are they incurring now, which might go away in the future? Do they have a good grip on a reasonable dollar amount on what they expect to be spending in your later years? Women's financial involvement needs to address two different life stages. First, women need to address where their retirement income will be coming from during the time that their spouse is alive. What savings are available? Are there pensions and how are they being taken? How is it invested? Is it being spent at a reasonable rate given the likelihood of longevity? For the second stage, women need to address the fact that they will likely live alone for a number of years, since 80 percent of men pass away while married, and 80 percent of women pass away widowed. While some expenses may go away when single, new ones may arise (such as home care and home maintenance). And since a substantial amount of savings may have been spent on an ill spouse, how will this potential shortfall be addressed? Is there a need for additional life insurance, or should the savings be adequate? Were the pension payments structured to continue beyond the husband's death, or did they go away? These questions, along with many others, need to be considered, understood, and addressed. Learning to take a risk Another concern we see with women is that they may be too conservative with certain investments. Once involved in the financial planning process, women tend to spend more time investigating available choices than their male counterparts . they aren't afraid to admit they are lost and ask for directions! After weighing the choices, they often look for options that won't have any risk of 'losing money'. But the risk of being overly conservative in one's investments is that inflation over time will erode the value of your assets. And since women have an even longer retirement time frame to plan for than men, this is an even bigger risk for them than their spouse. Women should be willing to accept a little short term volatility in exchange for better long term growth - yet the tendency is to do the exact opposite. While being conservative can be good, being too conservative can be dangerous to one's long-term finances. None of the issues mentioned above are insurmountable. In our practice, we deal with helping couples (and widows) through these issues nearly every day. They often require a bit of perspective from an outsider - a financial planner, investment advisor, or other financial professional. Don't be afraid to question the specifics of the financial plan for the decades that you may be spending after the passing of a spouse. And most importantly, ask questions about all aspects of the financial plan until you feel comfortable with the plan and understand the rationale for the choices. At some point in the future, the odds are very high that managing the family finances will be 100 percent the woman's responsibility. The time to prepare for that is now. When a woman understands her current financial position, it makes the transition to controlling the money that much easier. Remember, you and your spouse worked hard to earn what you've saved for retirement. You want to enjoy the years of retirement and not worry about how to pay the next heating bill, whether you can afford to help fund an account for your grandchildren . and possibly even leave a little behind for your heirs. Column provided to PRIME by:St. Germain Investment Management; 1500 Main Street, Springfield, MA; Phone is 413-733-5111 or 1-800443-7624; web site:www.dgstgermain.com