Double-Dip Concessions to your Financial Plan
Written by Emily Sanders Wednesday, October 19 2011
Has our country entered a double-dip recession? It depends on who you ask, but the financial blow that many have taken lately can feel like a kick when you are down. The economic instability since 2008 is wreaking havoc – even if you manage to keep your job. Many will have to make concessions to keep their financial plan afloat.
The recession has caused many women to take another look at their financial plan, and many are coming to the same conclusion. We will probably have to work longer than originally planned, cut spending now to save for retirement, or both. Unfortunately, it’s not just the recession but other demographic forces that are converging against women’s financial futures. Here is what to watch for and what you can do about it.
Longevity – Whether it is an active lifestyle or advances in medical care, the figures are in – people are living longer, and, actuarially, your longevity only increases the longer you live. As a woman, you are expected to live longer than the average man. Many women dream of an early retirement at the magical age of 55, but can 30 years of working supply funds for 40+ years in retirement? It’s not likely.
It is difficult to predict how many years you will need to support yourself in retirement, making preparation crucial. Look at the family tree and how long your ancestors lived and apply common sense. If your parents both made it past age 95, there is the possibility that you might, too, so be sure to plan accordingly. If retirement assets are lacking, it may well be necessary to work longer than originally planned.
Family – Ever order a sandwich that was literally taller than your mouth is wide? Baby boomers are often referred to as the “Sandwich Generation,” but it seems that what once might have been considered peanut butter and jelly has turned into a double-decker club with extra layers. Women are typically the caregivers of the family, and knowing how much you are willing and able to assist others needs to be a part of your financial plan.
Due to increased longevity, women are physically and financially caring for elderly parents. It’s not uncommon for women to assist not only parents and children, but also grandparents, grandchildren, in-laws, aunts, and uncles. Parents or other relatives don’t easily open up about their financial situation, but delicate discussions can assist in developing your own financial plan.
Medical Care – An article titled “Long-Term Care over an Uncertain Future: What Retirees Can Expect” (Inquiry, Winter 2005/2006) reports that more than two-thirds of people over age 65 will need long-term care at some point during their lifetimes. If you are a woman, that number increases to 79 percent!
This statistic illustrates why long-term care insurance is rather expensive, but necessary. Long-term care insurance is recommended for people in their 50s who cannot otherwise afford to self-insure. Work with a financial planner and insurance broker to determine if this insurance is right for you. Consider talking to your parents, too, especially if the financial burden of their care is expected to fall to you and your siblings.
Women are held more financially responsible than ever for their retirement years. Pensions have disappeared and been replaced by 401(k) accounts to which employees must contribute and choose the investment direction. Social Security cuts seem politically imminent, and future inflation rates are expected to rise. It is likely that a working woman will have to stay employed longer and/or adjust her lifestyle to remain financially secure.
Financial planning for your family can be overwhelming, a key reason many people fail to plan at all. Educate yourself on financial planning by reading books and researching reputable sites online. Align yourself with a financial planner you trust so that not only are you able to share your financial goals and insecurities with her, but also that you are able to act on recommendations with confidence.
Emily Sanders is founder, president, and CEO of Sanders Financial Management in Atlanta, a firm dedicated to serving the financial needs of emerging affluent women. She can be reached at www.sandersfinancial.com.
