Preparing Women

Advisors should make key financial suggestions to their female clients.

By Lucretia DiSanto Jones

When one considers the fact that women are likely to outlive their husbands, get a divorce or never marry, retirement becomes an issue that merits serious thought.

Insurance and financial advisors can play an important role in educating and informing women about retirement issues. They must, however, keep in mind the differences within the female population, says Bruce Harrington, vice president of MFS Investment Management and product manager of its retail retirement products.

“You have a number of groups of women to consider,” says Harrington. “You have those women who are the caregivers for the children and the family. They might have worked at one point but have been out of the workforce for a while. Then there are the female executives who have money of their own. They might be divorced, so they’re worried about taking care of the family, but they are also managing their careers, and they probably don’t have time to think about financial planning.”

What do I do?
Harrington says that another scenario often arises, especially among Baby Boomers, when a woman becomes a widow unexpectedly.

It is not unusual, says Harrington, for a woman to be a millionaire and not know it until her husband dies. She is then left wondering what to do with the money. Advisors can help female clients navigate this and other retirement-saving issues—those that go beyond “planning early” and understanding what they already have in place.

For example, it is crucial for advisors to impress upon their female clients the importance of preparing a will and maintaining accurate beneficiary designations. “What tends to happen,” says Harrington, “is a woman gets married, has kids and doesn’t keep her will updated or never gets around to doing it in the first place. The will is a great way for assets to flow the way you want them to flow. Without a will, the assets will flow through probate.”

Women also need to ensure they are designated as the beneficiary on their husbands’ retirement savings accounts, otherwise, the state could step in and take a large portion of his assets upon his death.

Taking a break
Another issue that women face in saving for retirement is the breaks they have in employment—whether in between jobs or on maternity leave.

Harrington points out that women must be aware of vesting requirements for their pensions, 401(k) accounts and other benefits. “It’s important to think about the vesting schedule, which is typically five years,” he says. “Sometimes the employee has a child and leaves the company in her fourth year when maybe she could have worked it out with the employer to work part time and hit that vesting point.”

Overcoming fear
Advisors must also help women overcome their fears of the stock market, especially women with little or no exposure to it. Suggesting a course on the basics of investing will go a long way toward empowering female clients.

Pay yourself first
Setting financial priorities can be a struggle for women. With the numerous financial demands they face—buying shoes and clothing for the kids and maintaining the home, for example—saving for their retirement or their children’s college education may not be a top priority.

To help shift the priorities, Harrington says, women should pay themselves first by thinking of the $50 or $100 per month to be saved as a bill. Writing a budget to understand where money is going will make it clear. “It always helps to put it all in perspective,” he says.