Many Women Unsure How to Assess Retirement Needs

(WOMENSENEWS)–Many women are taking stock at the close of what has been a dismal year economically to take stock of their financial resources and assets–especially the funds they have put away–or not–for retirement.

However, many women may believe they do not have sufficient understanding of their finances to adequately assess their needs, according to a recent study. In fact, while 85 percent of women consider retirement security very important, only 25 percent feel they know the amount of money necessary to provide it, according to a recent Prudential Financial study of 400 female heads of households across the country. There are no comparable statistics available about men.

The study, conducted in February and just released to the public, also showed that fewer than 4 in 10 women are very knowledgeable about the variety of retirement products available to them.

"Women need to better understand and be more educated about what they will need to comfortably retire, so that they can take control of their financial futures," says Gail Farkas, the Newark, N.J.-based vice president of marketing for Prudential Financial. "They have to examine their long-term financial goals and work toward those goals."

To do this, women need to accurately assess their financial situation–including assets, cash flow, and expenses, Farkas adds. They also should be planning for their long-term care and pay attention to estate planning for their futures and their children’s futures. Only 14 percent of those surveyed have done detailed financial planning by creating a will, estate, or trust plan, and only 24 percent fully understand these services. However, 73 percent of women surveyed did say that passing money down to their children is important.

Women with Children Should Plan Differently Than Those Without

Widow Lydia Mallett, 48, chief diversity officer at General Mills in Minneapolis, knows how important estate planning is, since she is in charge of her finances for herself and daughter Noel, 11. She began working with a financial planner about five months ago. Since then, she has redone her will, taken out long-term disability insurance and invested in low-risk life insurance products.

"Since I have to plan for my own retirement and for my daughter’s future, I am working to learn and understand more about retirement products so that I can make wise decisions in our best interest," Mallett says. "I must do this for both of us."

Like Mallett, female heads of households need to figure out how they will generate cash flow when they retire. They should examine their pension fund, potential Social Security payments, 401(k) plan, and other assets to see how much money they will be bringing in each month to pay able to pay their bills and support their lifestyle down the road, says Diahann Lassus, co-owner of Lassus Wherley and Associates, a New Providence, N.J. financial planning firm. Figuring out how much cash will have available down the line will determine what can or cannot be spent over the years and how much should be saved to allow for a comfortable retirement, she adds. Lassus also suggests taking a basic financial planning course at a local community colleges or high school.

Elaine Malek, 52, president of a human resources and educational consulting firm in Milwaukee, realizes that she needs to plan very carefully for her senior years and beyond. Since she lives alone and is divorced with no children, she has no obvious caretakers as she ages and no immediate heirs to her potential estate. Malek has carefully divided up her current assets between her two sisters, six nieces and nephews and 10 grandnieces and grandnephews. Other steps she has taken: buying long-term care insurance to help preserve her assets, leaving her home to one of her sisters in her will and designating a close friend to receive her prized Latin American art collection.

"You have to spell out everything in the most precise detail in your estate when you don’t have kids, since there is no logical line of succession," says Malek, who has worked with a financial planner. "You can’t wait until it’s too late to plan for your later years or it won’t get done."

Consider Financial Needs before Retirement

In addition, set 5-year, 10-year, and 20-year personal and family financial goals, recommends Westbury, N.Y. financial planner Judith Beckman. "Are you saving for a child’s college, or a home, or for starting a business? Ask yourself these important questions as you set your goals and plan your finances," Beckman says.

Take advantage of savings vehicles such as tax-deferred accounts, Beckman notes. Also, have savings that can be easily tapped in case of an emergency.

"If the fridge and the car both die on you the same day, you want to know that you will have the money to take care of things like this and not have to go into debt to pay for it," Beckman advises. "Even if you can only put away a small amount each month, it does add up over the long-term."

Women who may not be that confident in their investing knowledge also can join local investment clubs, as a way to pool resources with other women, suggests San Luis Obispo, Calif. financial planner Bob Wacker. The National Association of Investment Clubs makes referrals to local chapters.

"By investing together, women can learn more and they share the risks," Wacker says. "You always want to be learning as much as you can about your finances."

Laura Koss-Feder is a freelance business writer who covers small businesses, personal finance, and career/workplace topics. She has written for The New York Times, Business Week, Time, Money, Investor’s Business Daily, and Newsday.