Alliance Investment Planning Group

Does this sound familiar?  "My name is Joyce and I've been divorced for a little over three years.  I have two grown children.  My daughter was married last spring and is expecting my first grandbaby.  My son is moving back home this fall and plans to attend an area technical institute.  My father died last year and my mother recently suffered a series of small medical setbacks...  I earn a modest but comfortable salary.  Over the years, I've steadily contributed to my 401(k) plan.  I closely watch my spending, faithfully pay my bills, and carry little debt."  This is the story of a woman who, in spite of her education, hard work, and attention to her family and finances, still worries about whether she's on the right track.¹

Joyce goes on to say, "When I was married, my husband handled all the household finances and investments.  I was responsible for paying the bills and keeping the checkbook.  I want to be able to help my mother.  I want to be there for my kids and grandkids, too.  But I worry about the possibility of someday ending up a homeless bag lady."  Remarkably, Joyce isn't alone.  A 2006 study found that almost half of women surveyed feared someday becoming a bag lady - even women earning over $100,000 annually!¹

For perspective, consider that women fought for and won the right to vote a mere 88 years ago.  Nearly 2/3 of women are in the workforce today, compared with only 1/3 in 1950.  Over 2 Million women earn over $100,000 annually, a 400% increase over the past decade!  Many women today out-earn their husbands - 60% of women with business degrees and 75% of executive women working for Fortune 500 companies.  In 2005, female college graduates outnumbered male graduates by 33%.  Half of all stock investors are women, and women will soon control 60% of the country's wealth.  Women business owners control half of America's companies, employing more than 19 Million workers and generating nearly $2.5 Trillion in sales.^1,2  Impressive progress for sure!

Despite their remarkable achievements, women must deal with unique and daunting financial challenges.  Women take off, on average, 12 years from work to care for children or parents, compared to less than 2 years for men.  Not only does this extended time away from work impact their salaries and limit their career growth, but women's access to pensions is also negatively affected along with the pension benefit level itself.  A 2003 study found that 45% of retirement age men received average annual pension benefits of $16,470, whereas only 28% of retirement age women received average annual pensions of $9,217.^3,4  That says nothing of the reduction in social security benefits.

Following a divorce, women's standard of living decreases by 27% while men's increases by 10%.  Money is also the primary cause of marriage problems today, with women reporting that money is 20 times more likely than sex to be the biggest source of conflict with their husbands.⁵    Women still live longer than men, by a little over 5 years.  Women comprise 70% of the age 85+ population, with only 13% still married.⁵  In summary, women earn less, are less likely to have a (smaller) pension, put their careers on hold longer to support family, and suffer financially following a divorce.  To top it off, women's lower salaries, pensions, and social security checks must stretch further because they outlive men and typically die widowed or divorced.

Can you now start to appreciate why Joyce and other women feel insecure about their financial situation, despite the enormous progress women have made over the last century?  U.S. Census data indicates that, across every age group, poverty rates among women far exceed those of men.  Fortunately, there are strategies women can employ to get on the right track and prepare, as much as possible, for what may lay ahead.  We'll explore some of these strategies in upcoming blogs.

¹ Allianz Women Money & Power Study, 2006

² "Key facts about women-owned businesses", Center for Women's Business Research, 2004

³ Bureau of Labor Statistics, 2006

⁴ Institute for Women's Policy Research, 2005

⁵ Center for Disease Control, 2005