Stanley - At the doorstep of change

Friday, October 15, 2004

More women play a role in financial decisions

Women's financial health. It's certainly not a new topic. In fact, the concept gains more and more interest each year as millions of Baby Boom women get closer and closer to retirement.

But as the media and consumer groups work hard to promote women's financial issues, the heart of the topic can often get lost in the shuffle: Are women more empowered today to take charge of their own financial futures than they were in years past?

While it is true that women still have work to do when it comes to securing their own financial tomorrows, a recent study revealed they are making progress and appear to be at the doorstep of change.

Women play a more significant role in managing all aspects of household finances than ever before. In fact, the 2004 study revealed that about nine in 10 have sole or at least joint responsibility for managing their household's financial well-being. Their joint responsibility for products like investment accounts, IRAs, annuities and long-term care insurance policies has markedly increased over the past four years.

In addition, almost half of women, 47 percent, expect to boost their savings, or invest more money, over the next 12 months. And more than four in 10 expect to prepare a will or estate plan over the same time frame. When you consider many women have experienced the predicament of parental estates lingering in probate courts because a will did not exist, that may explain their desire to develop a formal plan.

We are living in an era of increased longevity, higher healthcare costs --particularly assisted living-- and a weakening Social Security system. As a result, women recognize they will bear a greater financial responsibility for securing their retirement than generations before them. Therefore, it is not surprising that the study also revealed that retirement security serves as the most important focus of women's financial goals.

In fact, on a 100-point allocation scale, women allocated 48 points to retirement issues, including having enough money for a comfortable retirement (20 points), achieving financial independence/avoiding being a financial burden on others (17 points) and making sure retirement savings are not outlived or spent down (11 points).

Prudential's study on "Financial Experience and Behaviors Among Women" polled 1,134 American women about their financial knowledge, goals, actions taken and confidence in attaining financial goals. The survey was administered Feb. 5-16, 2004. The margin of error is 2.9 percent at the 95 percent confidence level. However, in addition to retirement, many other financial matters require women's planning and attention.

Controlling expenses (30 points) by reducing debt, lowering personal taxes and setting a budget is a huge challenge in the U.S. A large majority of women feel they need help when it comes to preparedness for handling financial matters. An overwhelming 82 percent acknowledged they could potentially improve their financial outlook by seeking guidance and counsel.

And 26 percent need help in almost all areas of financial education, including products and issues. By their own assessment, women believe they should acquire or refresh their knowledge of personal financial issues. This is a common sentiment across various economic and generational segments, and the desire for such knowledge is the precursor to women taking the formal steps to achieve the retirement they deserve.

Along with wanting education, the study also revealed that, with the exception of long-term care insurance -- which women prefer to learn about from multiple sources -- women prefer a financial professional as the source for knowledge. Before you sit down with a professional, though, it's important that you look at your financial situation honestly and without distraction.

Perform an assessment that examines risk tolerance Are you aggressive or are you timid? There is no such thing as an investment without risk. Even if you rely on the guidance of financial professionals when determining the suitability of an investment, you must remember that it is your investment and your risk -- and you have to be willing to live with both.

You can better manage the uncertainty of investment risk by not "investing" in your investments. Be rational, not emotional. Look at risks and returns in terms of probabilities, not absolutes or hopes.

Goal setting

It is with financial goal setting that sound judgment really comes into play. Your financial goals must represent things that only you can weigh: What are your goals for your children? Is college in their future? If they are overachievers, is Ivy League a financial possibility? And your retirement. Not whether you eventually will, but rather at what age, with what quality of life, and where? All these things need to be considered, and in which order do they take precedence.

Obligations in detail

Will you care for your parents? Do you have the financial means to support their assisted living if need be? Like aspirations, you must think through the obligations that may greet you later in life.

We're all growing older and age has the most influence on our timetables. What was financially important 15 years ago may not be as important now. Are you planning to go back to school? Are you getting married and starting a family? You must understand where you are in your lifecycle and be able to comprehend how that plays a role in your financial outlook.

One fact about investing that is both fundamental and beyond doubt is that the more time you have to earn and invest towards your goals, the greater your chances for success. Regardless of the ultimate financial selections you make, a strong plan focused on your timetable allows you to correct mistakes, weather storms in the economy, and adjust your strategy.

According to a major financial institution that has been tracking the financial experience and behaviors among women since 2000, women indicate that they are taking on more responsibility -- either solely, or jointly with a partner -- for increasingly complex financial decisions. Despite that, 2004 survey data shows a crisis in confidence.

Knowing how much money they will need during retirement is very important to nearly seven in 10 women, but just one in 10 are very confident they have a good grasp on the situation. To address this crisis, women must seek the information needed to make smart decisions. With this knowledge comes the power to take charge of your financial futures.

Sharon Stanley is a representative of The Prudential Insurance Co. of America in Cape Girardeau. (334-2603 )

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