Financial Focus - August 14th, 2019 - NelsonCorp Wealth Management

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Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member of FINRA, SIPC.

Announcer:
Investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice.

Announcer:
Now here’s today’s Financial Focus program.

Amy Cavanagh:
Good morning and welcome to the program. This is Amy Cavanagh. I’ll be the host for the program this morning. For those of you who are long time listeners, you’ll recognize my voice. For those of you who are more recent, you may not know me. My name is Amy Cavanagh and I’m a financial advisor down at NelsonCorp Wealth Management. I’ve been with NelsonCorp since 2003, although it does certainly not feel that long. Time has a way of going past really quickly. We have eight financial advisors at the office now, as well as some staff. If you have any questions or comments, we’d love to hear from you and I’m sure we can handle any questions you might throw us.

Amy Cavanagh:
Today the topic is going to be four things every woman should know about investing and saving for retirement. The first one is I’m going to talk about the wage gap. Number two is life’s other priorities that can impact your plan. Number three, investing for a family adds complexity to your plan. Number four, genetics are in your favor. In other words, women on average live longer than men.

Amy Cavanagh:
Women have more purchasing and decision-making power than ever before. 40% of us will serve as our household’s primary breadwinner at some point. That is a change from the 1960s, almost a four-fold increase. 66% of us have experienced a major financial transition on in life that might be a major career change, or a divorce, a death of a spouse, something along those lines. 96% of us are either sharing in or primarily in charge of a financial decision. 90% of us will be financially responsible for our families at some point in our lives.

Amy Cavanagh:
Let’s talk about the wage gap. We hear about that on the news. It’s been in the news lately with the Hollywood actresses and their complaints. But average, a working woman, a woman working full-time will make 55,000 a year, while a man, on average, will earn $75,000 a year. As you can imagine, that will also have a huge impact on your investing power. Most of us save for retirement based on our current earnings. We put a percent of our earnings in 401(k). Obviously, if we’re starting at a lower point, we’re saving less.

Amy Cavanagh:
Let’s say that you invest the same percentage of your salary as your male counterpart who earns more. You both do 10% of your salaries, and then you both also get a 3% annual increase in your salary. If you both invest in a portfolio that generates a 7% average annual return, at the end of 30 years, the male counterpart would have $379,000, while the female would have $257,000. That is the gender gap. You need to either invest a larger portion of your salary over time, or you need earn a higher rate of return to have the same amount of savings for retirement.

Amy Cavanagh:
Let’s move on to number two because I don’t have a lot of time here. Life’s other priorities can impact your plan. Women are more likely to take time out of the workforce to care for loved ones. In fact, when we start having children, 27% of us stay at home, while 24% of us switch to part-time work. If we’re caring for a loved one, that might be a senior parent or a special needs child, 17.5 of us stay unemployed in order to do that, while about 20% of us work part-time.

Amy Cavanagh:
Being out of the workforce may be the right choice, but it’s important to understand the potential impact an extended absence could have on longterm goals, and then what you need to do to make up for that. It’s not a simple calculation. It’s not as simple as saying, “Well, I make $55,000 a year if I was working. If I’m not working, how many years am I out of the workforce?” and do that multiplication. It doesn’t quite work that way because our salaries grow over our careers. We’re missing out on that annual growth, our annual raise, if you will. Our 401(k) contributions aren’t happening, therefore we’re not getting a match or earnings on those contributions. What we currently earn impacts our social security, as well as our medical benefits. That will also affect our longterm savings for retirement.

Amy Cavanagh:
Let’s go on to topic number three, how investing for a family adds complexity to our plan for retirement. About 40% of the households have children. The average cost of raising a child to the age of 18 is over $200,000.

Amy Cavanagh:
We have to make some choices. We can’t save everything we might feel like we need to save for retirement because we’re raising kids and we might be saving for retirement. We have to strike a balance. I’m sorry, we might be saving for college. Not all of our savings can go for retirement if we need to pay for our current needs for our children, as well as their college savings. We need to strike a balance between saving for college and saving for retirement.

Amy Cavanagh:
By the year 2036, so if I have a young child now, when they turned 18 and head off to college in year 2036, a four-year public college is going to cost $193,000. Just over. 193,088. Also, the cost of retirement will be about 10 to 12 times our current income. We have to save for both college and retirement. It can be rather complex. If I’m currently earning $55,000 and I need to save 10 times that for my retirement, that’s $550,000 that we need to save. It can be a little bit more of a challenge to find ways to save to both.

Amy Cavanagh:
Then let’s talk about the genetics of living longer. Women on average live longer than men. We earn less, we spend less time in the workforce, we have challenges when earmarking money for retirement, and then we live longer. The oldest person on record was a woman and when she died she was 122 years old and 164 days. Out of the 20 oldest people to live, 19 were women. If we look at the 100 oldest people on record, 94 were women. Women tend to on average outlive men. In fact, male life expectancy is 76, while female life expectancy is 81.

Amy Cavanagh:
Statistics also tell me that on average women are two-and-a-half years younger than their husbands, meaning that they could be on their own for at least seven years. If men live to 76, they can expect to live about 11 years past the age of 65, while women can expect to live 16 years past the age of 65. We need to talk about what sources we have for income in retirement.

Amy Cavanagh:
If we look at our retirement income, where is that coming from? Well, about 9% comes from our personal savings. Not anything that’s specifically earmarked for retirement, not our IRAs or our 401(k)s, but our personal savings. 9%. 18% comes from our 401(k) and our pension. 30% of our retirement income comes from part-time employment. Maybe after 65 and I officially retire, I might still work part-time. While 35% comes from social security. We can see that social security is an important decision to make. I know that Nate and James have talked about social security on the program here and you’ve heard many topics about that through the years, about how important it is to make that decision. If we’re looking at 35% of our income comes from social security, it’s an important decision. But it’s also important to note that four out of 10 women over age 65 who live alone depend on social security for nearly all of their income because they tend to outlive their husbands. It means that [inaudible 00:10:03] husband’s decision on social security is vital. In fact, on average, the average monthly social security benefit is 1,461, while the average monthly expense is 3,800. That just does not match up.

Amy Cavanagh:
Those are the four things I wanted to talk about with regard to women and investing and saving for retirement. Again, my name is Amy Cavanagh. I’m with NelsonCorp Wealth Management. Please give me a call if you have additional questions or comments or concerns, 242-9042. You can also find us on Facebook. Our website is www.Nelsoncorp.com and you can email us if you prefer. Wishing all of you a happy Wednesday. Enjoy the last few a weeks of summer that we have left. Have a great Wednesday.

Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member of FINRA, SIPC.

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Financial Focus – August 14th, 2019