How women approach retirement differently

Feb 3, 2014 @ 12:00 am

Runtime: 5:49

Many women take a more risk-averse approach to retirement planning, according to InvestmentNews Contributing Editor Mary Beth Franklin and The Botsford Group CEO Erin Botsford. Find out why.

Video Transcript

This week on WealthTrack's planning a course towards a secure retirement-- award-winning financial adviser, Erin Botsford, and Social Security Expert Mary Beth Franklin, map out the strategies and products you'll need to anchor your financial future-- next on Consuelo Mack WealthTrack. I began the interview by asking the key question. What is different about retirement planning for women? -I think most women will live very long lives and people always underestimate how much money they're going to have or income they're gonna need for perhaps 30 years in retirement. So it's really important to think about retirement now. -Longevity-- what else Erin? -Well, I think the vast majority of women have not taken the lead role in their financial planning. A lot of times they paid the monthly bills and they've been responsible for that but they haven't taken that next step to prepare for, you know, their investment portfolio and things like that. -So when clients come to you, a couple comes to you, is it usually the man who has basically handled the investments-- -Yeah. -and the long0-term financial planning for women? -Yeah, pretty much. It seems like they do divvy up the chores. She will pay the monthly bills because he travels a lot with his business or whatever but he takes care the investments. And they, you know, they think of it that's a good way to, you know, assign the tasks so they both are involved in it but she doesn't have as much confidence on the investment side and he doesn't have a clue where the money goes. -It's interesting. There are all sorts of psychological differences too. I mean, there have been studies that have shown that women, for instance, are much more risk-averse and conservative about investing. They are also much more security-conscious as well. So, in order to talk to us to get us involved in a retirement needs-- I mean, how important is psychological aspect to this as well? -I think it's critical and I think what Erin has brought up is that so many women basically run their households, the day in and day out cashflow. If women could think of retirement as future cash flow, I think it would be a lot less intimidating. And that's basically what it is particular in Erin's book, where she talks about preparing for retirement is figuring out how much it cost to live and matching up your investments or sources of income to cover those needs. -Right. The big retirement risk going out of money before you run out of time but it's so interesting because I know, Erin, one of the things that you've emphasized in your book and in your advice to your clients is that don't think about the number. And I can remember people-- older people that I know thinking about, "Well, I've made a million dollars. Therefore, I'm set for a retirement." You're saying, don't think about the number. Think about that cash flow, that budget that you need to fund. And is that something that women-- that's a natural thing for them to think about. Is that an emphasis that's easier for women to think about? -Well, it should be because they've been doing it most of their adult life. They usually do pay the bills or have something to do with it. But I think in the overall mainstream financial advice-giving, you know, both men and women income or cash flow in retirement hasn't been the emphasis. It's been about that big number accumulating that balance sheet number than net worth. So I think there needs to be a change in the structure, and it really is like she said it's really a continuum of what's already been happening. -Priorities for women, how different are they for women than men? -Oh, so much. I think-- -Where do you start? -That behaviorally there is a big difference for those women who do invest whether through their 401K plan at work or on their own. Yes, they do tend to be more conservative, less risk-averse. But studies often show because they are long term investors, that they often do better than men who tend to turn their investments to jump in and jump out of the market. They also say that men during this recent economic down turn. Men tended to be angry and they wanted to get back at the market and they would often jump in and they would sell things that went down and then it turns out what they had sold actually went back up. Women were more fearful and consequently more respectful of their investments. And when they work with advisers, they tend to ask more questions and what they want mainly is tell me how much you're charging me, what am I getting for that money, and explain to me what this investment is. Don't push a product down my throat. Explain to me the strategy of why I should invest and once I understand that and I'm comfortable with it, I'll do it and I'll stick with it. -So that's interesting. So women will asks some of those top questions that a guy might not be willing to because he's gone to an expert and therefore he's just gonna leave it in their hands, is that right? -Do men ask directions for anything? It goes across the board. Now what's interesting is a lot of women-- there's a lot of studies that women would like to work with female financial advisers. But when you look at the number of financial advisers, only about 25-30 percent are women. There are a lot of potential women investors out there that we'd like to work with a woman advisers. So I think we're gonna see that in of the industry growth over the next few decades.

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