Tuesday, April 1, 2008

Women and Poverty – a wake up call!

I like to have the evening news on while I'm loading the dishwasher or fixing dinner. I'm a true multitasker at heart. I don't usually pay strict attention to the broadcaster, often hearing only the key points or main topics of the story being related, looking them up online another time. However, the other night, one story caught my attention through the sound of running water and the clang of dishes being loaded for washing. The gist of the story? Elderly women are one of the groups being hit hardest by the recent economic woes.

This is nothing new of course. I remember growing up in the 1960's and knowing plenty of elderly women who were living in poverty or headed in that direction. It was still a time when women were expected to grow up and marry, have children and basically support their husband's career. The majority of women truly believed if they followed this path they'd be taken care of in their later years. I remember conversation after conversation with women and young girls planning their lives around following this exact path with no thought to what would happen to them if things didn’t work out just as they expected - if their prince charming really didn’t take care of them “forever after” like the fairy tales we loved as girls, regardless the reason.

The 1960’s and the 1970’s were also a time when women were trying to assert themselves in the world - some more reluctantly than others. It was also a time of increasing divorce rates and men who left their families for other, younger women or to “find themselves.” Marriages were increasingly easier to dissolve and a growing number of women were becoming single parents with or without the cloak of marriage vows.

What is still shocking in this new, allegedly more enlightened century is how many women are still following this path – the path of not being prepared to support and take care of themselves if life doesn’t work out the way they expect or want it to. It’s okay to want someone to love you forever and be there for you as a soul mate, a lover, and a friend. What’s not okay is being unprepared for the zingers that life tends to send our way. What’s not okay is believing that you can’t have that soul mate and still be prepared. The two are not mutually exclusive.

An article in 2005 at the US Dept of Agriculture web site had some very sobering findings – and unfortunately the overall economic situation for women continues to worsen. While this article focused on women living in rural areas it’s a wake-up call for all women since we outnumber men in later years. We tend to live longer than men, which is a blessing but can also be a curse if you’re living in poverty with limited resources. Here’s the link for the article:

http://www.ers.usda.gov/AmberWaves/September05/Findings/OlderWomen.htm

According to a study by AARP older white women are twice as likely to live in poverty than older white men and for African American women it’s three times as likely. This is shocking. Again, because we live longer and make less money overall than men, we have less money to spread out over our lifetime. And the older we become the fewer options we have for work and generating additional income.

Here’s the link to the study:

http://www.aarp.org/research/assistance/lowincome/2008_03_poverty.html

So, what’s the answer?

Well, there is a correlation between education and how much we earn over our lifetimes regardless of gender or race so, one answer is education. There’s sill a pay disparity between men and women but higher education does bring higher wages overall. The Bureau of Labor Statistics has published some attention getting numbers in a chart called “Education Pays” at their site:

http://www.bls.gov/emp/emptab7.htm


If what I’ve shared so far isn’t chilling enough go to the Women Work! Site at:

http://www.womenwork.org/policy/factpoverty.htm


And if you want to see what’s happening to women in the rest of the world go to the World Health Organizations site:

http://www.who.int/mediacentre/factsheets/fs252/en/index.html


For thirteen years I worked as a senior tax advisor for a leading tax preparation firm and I was able to understand first-hand just how little women earn compared to most men. They tend to take jobs that accommodate their family’s schedule and their husband’s career. They tend not to have as much saved in their retirement accounts as their husbands because they make less overall which affects how much their employer matches, or they don’t save anything! They also don’t consider their income to be as important as what their husbands earn. It is absolutely essential that everyone – men and women – contribute the minimum amount to their retirement accounts to receive their full employer match. Not doing so is financial suicide.

Women also tend to cash in their retirement savings first when there’s a financial emergency for the family, which is another form of financial suicide. A way for women to build financial success is for them to obtain as much education as they can afford as early as possible, whether it’s at a university or college system or a vocational school, and to work and save as much as they can for retirement early on and NEVER TOUCH IT. Growth over time is part of the magic formula for retirement wealth.

That is until they retire at a qualifying age.

Taking money out of retirement accounts prior to reaching the appropriate age introduces all kinds of taxes and penalties and women risk loosing as much as half of that money unless there are specific provisions to exclude these costs. Before prematurely cashing in any retirement accounts women should consult with a tax professional to see the financial impact of this decision. Often, clients would come in after the fact and when I showed them the heavy cost of their decision they often asked if there was a way to undo what they had done and unfortunately there wasn’t. It’s like that old saying of putting the cart before the horse. The horse might be able to push the cart a little but it isn’t a very efficient arrangement, costing both time and money. Just put the horse in front and DO NOT cash in your retirement accounts prematurely!