Women Still Lag in Planning Their Financial Futures

Christopher Hayes has an urgent message for many baby-boom women: Start planning for retirement now, or you could face greatly reduced circumstances later.

As executive director of the National Center for Women and Retirement Research at Long Island University's Southampton College in New York, Dr. Hayes is conducting a three-year study, the Scudder Baby Boom Retirement Preparation Survey. His findings point to the need for better preparation by one group in particular: divorced baby-boom women.

Many of these women, Hayes says, define themselves as spenders rather than savers. They do not budget or save on a regular basis, and their investing is inadequate. Two-thirds expect Social Security to be their primary retirement income. At least two-thirds have no defined pension or 401(k) or 403(b) plan.

"We estimate that about 33 million female divorced baby boomers are at significant risk of impoverishment because of this trend," says Hayes, author of a forthcoming book, "Money Makeovers: How Women Can Control Their Financial Destiny." Unless they immediately change their investment and saving habits, he warns, many will have to work into their 70s.

When researchers ask them, "What is your priority as you get older?" the top priorities were cosmetic surgery and remaining attractive. "If there ever was a group in a massive state of denial about what is coming around the corner, it's this one," Hayes says.

Many of these single women expect to get full Social Security and Medicare benefits. But, he adds, "The voice coming out of Washington is saying that all our entitlements are going to be reduced. What will happen when we have 33 million women entering their 60s expecting entitlements that are going to be scaled back? That has horrendous implications."

How can baby-boomer women prepare?

First, Hayes says, they must take a "very strong, hard look at what is psychologically preventing them from assuming individual financial responsibility." They need to educate themselves. They must play a bigger role in family financial decisions. Mothers must be good financial role models for their daughters.

Hayes advises women to call the Social Security Administration to find out how many work units they have accrued. If their employer has a defined pension program or a 401(k) or 403(b), they should make the maximum contribution. And they should find a financial planner who can help them.

Even women in their 50s who have not saved can start now, says Dorothy Clark, director of the center. She recommends establishing a budget and setting aside money every week. Then put it in a money-market fund.

"Get that up to $500, then invest it in a mutual fund," Ms. Clark says. "Keep adding to it on a consistent basis, perhaps $50 or $100 each month - whatever is realistic."

She suggests keeping some money in a money-market fund for emergencies, and building that up to start another mutual fund. Clark also emphasizes the need to read about finances and attend seminars. Her group gives free seminars for women around the country.

Clark is a prime example of what women can accomplish. Eleven years ago, when she began working at the center, she was newly divorced with four children. "This was all new to me," she says. "I had let the finances be taken care of by my husband." She began taking courses. She later put four children through college herself.

"Five years ago, when men started talking about money and investments, women went to the other side of the room," says Clark. "Today's woman, the 21st-century woman, needs to stand in the middle of that circle. Even if she's not contributing, she is listening and learning."

Too often, Hayes notes, women assume that financial planning is a very complicated, male-oriented skill. "But once you educate women, they become wonderful at it. Women must believe that they have the ability and the skills, he says, adding, "Money doesn't have a specific gender. It is never too late to start to plan."

* The National Center for Women and Retirement Research, 800-426-7386.