Practical advice to help guide women into a secure retirement
January 18, 2012 1:09 p.m.
Cindy Hounsell, President, WISER, Women's Institute for a Secure Retirment
Related Story: Are Women Behind The Curve In Saving For Retirement?
CAVANAUGH: This is KPBS Midday Edition. I'm Maureen Cavanaugh. As we just heard, the State of California's finances remain a problem yet to be solved. When it comes to personal finances, we all have a lot more control if we know how it use it. My next guest focuses on how women manage their money and prepare for retirement. And it seems a lot of women are not taking control of their finances the way they should. I'd like to welcome my guest, Cindy Hounsell is president of the nonprofit organization, WISR, the Women's Institute for Secure Retirement. She's in town to give the keynote address tomorrow at San Diego women's financial academy. Welcome to the show.
HOUNSELL: Thanks so much for having me.
CAVANAUGH: I want to invite our listeners. If they have a question about retirement savings, give us a call at 1-888-895-5727. Cindy, what is the difference between men and women when it comes to saving for retirement?
HOUNSELL: Well, women live longer, and they usually start out with less money when they need money for a longer retirement.
CAVANAUGH: So that's the essential difference? Is perhaps there a psychological difference as well?
HOUNSELL: Not really. The studies have all been done, but it comes back to women and men are equally savvy about investing, I think. And that is not savvy at all.
CAVANAUGH: Well, that's a problem.
CAVANAUGH: What's the first step in looking at your retirement and trying to figure out what it's going to look like, and what you need to assemble and start saving for those years?
HOUNSELL: Well, be I think the easiest thing for people to do is to figure out what you spend in a year and realize that when you get to retirement, you're going to need to make up your own paycheck. So where are your sources of income coming from, and that's usual Social Security. Your retirement at work. And if you don't have much of either of the other two, then you better save a lot more to make up for that so that you're sort of building your own paycheck.
CAVANAUGH: Now, a lot of women in retirement find themselves alone, either through divorce or because of widowhood, perhaps a condition they did not expect. How do you sort of change your mind set to say, OKAY, I'm going to have to take care of myself here and get that information that you need in order to make those plans?
HOUNSELL: Right. Well, I think it's paying attention early on to the family finances. Not just paying the bills. A lot of women think, well, I pay the bills. But do they know where the money is invested, do they know where their spouse's 401K is? Do they know if their spouse has a pension that's coming in? Do they really know the details of all the finances? And that's what you need to know so you do not have the big surprise when one of those events happens like a death or widowhood.
CAVANAUGH: What are some of the mistakes people make? I was reading some material you sent over, and I was interested to learn that people don't realize how long they're going to live?
HOUNSELL: Right. That's the biggest issue of all.
HOUNSELL: And there are a lot of studies around asking people when do you think you're going to retire? Well, I'm going to retire in three years. Really? How have you prepared for that? Prepared? Planned? No, not at all.
CAVANAUGH: So do you actually advocate a plan? A written-out plan of how much your expenses are and how much your income is going to be? That kind of thing?
HOUNSELL: Yes. Because every retiree I have ever met says the same thing: I wish I had known, and I wish I had planned better. And I didn't realize how much money I was going to need. And for women, the fact they live longer and need more money means they're going to have all those issues that come with living longer. And women have this other whammy that I don't like to talk about a lot, but women are much more likely to have chronic illnesses. And those chronic illnesses come with expensive drugs. I think all of us want to be able to afford our cranky pills in our 80s, and they're going to be exclusive. So we have to plan for that.
CAVANAUGH: We are inviting your calls if you have a question about retirement at 1-888-895-5727. Has the current economic situation made women more concerned about what their retirement might look like?
HOUNSELL: I think it's really made women pay attention. But the problem behind that is what can they do to change that? And the other thing that women do throughout their lifetime is that they are much more likely to work part time than men are. So now I just heard a report a couple days ago from the Department of Labor saying how many part time people have had their hours cut. So at a time when you need more money, you're finding out your hours are being cut.
CAVANAUGH: Right. What are you hearing from women about how their concerns have been increased because of the economy?
HOUNSELL: Well, I think there's a great concern because people are now beginning to focus. And so then they sort of throw up their hands and say, well, I'll never be able to afford to retire. I'm going to have to work forever. And -- but what are you doing? Even if that's true, what are you doing to prepare for that? Are you cutting back? Are you saving more? Are you doing anything differently? And I think what we see is that even people will say to me, well, is it too late for -- you know, for this person who's in their 60s? We sort of want to help people so we say it's never too late. But there may be decisions that you have to make sooner than later. Like, not wait until your taxes have gone up so much that you can't just pay them any longer if are your home. Maybe you need to sell sooner. Maybe you need to get a roommate. Or take an action.
CAVANAUGH: And I have heard people say, you know, well, I'm not worried about retirement because I can't retire. I don't have any money. I'm just going to have to work and work and work. But you say that's not always a realistic attitude.
HOUNSELL: Right. Because a lot of times, I mean, you may be married to somebody who needs care at home. And long-term care is a huge issue. Or you -- your own health may not hold up or you may lose your job three years before you expected to or your benefits may get cut. There's this attitude out there, well, I'm gonna be working so I'm not going to worry about it. But the situation may not be what it looks like today.
CAVANAUGH: How important is it working with a financial professional?
HOUNSELL: I think it's really important. Most people really don't know where to start. And I think it's a good idea to have somebody, an expert who's putting you on the right road helping you. But you need to take some responsibility too, and not be ready to just turn your money over to someone and tell them fix it for me.
CAVANAUGH: Right. If someone wants to do it themselves or at least compile the information they need and take a hook at it before they go anywhere, is that stuff available online, like how much Social Security you would get, how much you would get from other sources of pension income?
HOUNSELL: Yeah, and we have a lot of information on our website on how to get started which is wisrwomen.org. And there's lots of information around. We just try to narrow it down so people don't have to wade through thousands of pages.
CAVANAUGH: Again, you can join the conversation if you'd like. Amy is on the line from Rancho Bernardo. Welcome to the show.
NEW SPEAKER: Thank you. I just wanted to say that although I don't really know our finances, I pay the bills. Other than that, I don't really know how much money we have. But at the end of every year, my husband always gets this net worth statement, and he makes me go through it. Like how much do we have, how much do we owe, what's the projection on when we retire, how are we going to be able to live? So at least I have somewhere I can look if I -- you know, if anything did happen, and it says where all the documents are. So it's really a helpful thing.
CAVANAUGH: Thank you for the call. And that's a step forward, right?
HOUNSELL: Right. No, that's absolutely wonderful. Because the stories that we hear all the time are the horrible thing happening and all of a sudden a woman at a very stressful time in her life is looking for the documents. That's the last thing you want to be doing.
CAVANAUGH: What advice do you have for women who are still in their working years to boost their savings now in looking ahead toward retirement?
HOUNSELL: It's looking where you spend your money, figuring out how much -- the calculation of how much you're going to need. How much you are spending. And you multiply that times the number of years you expect to be in retirement, you at least have a ball park number. It's not accurate. It doesn't include inflation or healthcare, but it gives you an idea. And if you don't take those steps, you're never going to know where to start. You're not going to know how much you need. So I think because of the economic climate that the experts all say 15% a year is what you should be saving it is. And that can include your 401K and your match from your employer. So if that's -- comes out to 6%, then 9% would be a good number for you to be working toward. I know it's difficult, and people's circumstances differ, but it's a good thing to build toward.
CAVANAUGH: And how do you make the calculation this you are actually ready to retire? It's not exactly a question of age, is it? It's more a question of are you in a financial situation where you can retire, right?
LUCERO-CRISWELL: Right. And there's lots of information about the Internet too about whether you're ready or not. And what the financial decisions are, and what the risks are, and whether you're prepared for them. Because a lot of people are not prepared for the inflation. They just don't think about that. Or you have couples that are planning, but they're not planning for the spouses living longer. And there's no emergency fund. I know a woman who contacted us recently and, you know, she needed to get all these things done to her car and her roof, and upper insurance, and she said I don't have an emergency fund. Well, studies have been done showing you're supposed to have a 35,000-DOLLAR emergency fund just for those little minor details that happen.
LUCERO-CRISWELL: Usually the year after you retire.
CAVANAUGH: Wow. That's sobering. Now, San Diego is an expensive place to live. There are many places in America that are a little bit more expensive than others. So this is a high-cost kind of a town. Something you say people might be taking into consideration when they're planning for retirement is where they'll retire. And perhaps a place like San Diego, a community known for retirement is -- would be a little bit pricey for you if you don't have a lot of money.
LUCERO-CRISWELL: Right. And I think that's what people need to be doing because we like to say everybody at some point will be able to retire because at some point you won't be able to work till you're 85. And so making those changes, and making them sooner than later are going to make the big difference.
CAVANAUGH: I think, you know, the very idea of planning for this is a problem for some people because again, you're thinking about getting older, you're thinking about possibly your spouse not being with us, you're thinking about -- you know, your old age and getting ill and so forth. Do you find that that is a psychological impediment that keeps people from doing this?
LUCERO-CRISWELL: Yeah, it's huge. Who wants to go through that list of eventualities and make the accommodation for them? I think that does put the sobering point to people ever having the conversation.
MAUREEN CAVANAUGH: So what do you tell people who say I just don't want to think about this?
HOUNSELL: Well, your going to have to think about it eventually. So you might as well think about it when you're in a good place, still working. It's sort of like finding out your funeral insurance before you need it or getting the types of things that you need to set in store for your kids. And we've heard stories. One of the worst stories I ever heard was a woman who tried to tell her two daughters over and over again, they both lived in New York, she lived in Phoenix, you know, let me sit down with you and show you what I have. Long story short, a year of a nightmare of an illness, and when they went through her paperwork, they found she had long-term care insurance. They didn't know. So if they had ever looked, she tried, they wouldn't pay attention, and these were the younger children. So got to get over it.
HOUNSELL: Got over it.
CAVANAUGH: That's what you got to tell people. How do adult children factor into women's retirement plan? You just mentioned there were two daughters who wouldn't listen to the mother who -- I wanted to tell you these things. You need to know them. I think there are some people who do think that if things get bad, they'll move in with the kids. Is that a retirement option do you think for women?
HOUNSELL: No, I don't know too many women who really want to do that. Although that is something --
CAVANAUGH: It happens.
HOUNSELL: Yeah, it's something also being talked about. And I know people have had both. Their mother-in-law, and their mothers living with them for a period of time.
CAVANAUGH: That's not always an option that either party would have wanted, right?
HOUNSELL: Right, right it's not something women need to be relying on because there can be lots of eventualities that keep that from happening.
CAVANAUGH: Now, you mentioned long-term care, and planning for long-term care is very expensive. It's something that a lot of people don't want to do. What is the benefit of having that kind of -- making that kind of expenditure and having that kind of policy?
HOUNSELL: And that's an area that's really in flux at this point. A number of companies have pulled out of the long-term care business. It makes it really difficult. I think if you have the option at your work place, which a lot of companies do offer it, you ought to consider taking it up. Then it's greatly reduced, and if you get it at an earlier age, the premium is low enough so that even if it gets raised in the future, it's not sort of crippling your finances.
CAVANAUGH: Go ahead, I'm sorry.
HOUNSELL: What I find is anecdotally, there has been no study to show this, what happens is people who don't do anything about it, then they get into their '70s, these are people with some sort of means so they're able to afford it, and they see the nightmare that can happen to husband, wife, then they go and buy it in their '70s when it's so extensive, it's ridiculous. And they could have had it much earlier.
CAVANAUGH: Now, when you -- you deal with people who are trying to plan retirement all the time, most especially women. I want to finally ask you what some of the common mistakes are that you see that people make chronically when they approach this subject.
HOUNSELL: Well, I think relying on hearsay from their spouses. You'll be fine, you know? You'll have my pension. You'll have this, this, this. And it's not malicious, it's just the husbands didn't understand it either. And then the couple never sitting down and talking through those things. And so, you know, again, that's a surprise. The single women never sitting and figuring out, I'm alone, and I better figure out this stuff and know how much my monthly expenses are. That's another thing people don't do. There's a lot of talk about whether people spend more time planning a vacation than they ever do planning their retirement. So for something that can last 20 or 30 years, and affect the way you walk on the planet, I think women need to pay attention.
CAVANAUGH: Takes a little time. I've been seeking with Cindy Hounsell, which is president of the women's institute for secure retirement, and she gives an address tomorrow here in San Diego at the women's financial academy. Thank you.
HOUNSELL: Thank you. Thanks for having me.