Women and Retirement Planning

Introduction It’s not what you earn, it’s what you keep. Warren Buffet, CEO & Chairman, Berkshire Hathaway In Prudential’s tenth anniversary publication, “Financial Experience & Behaviors Among Women,” they found that women are becoming increasingly aware, engaged and actively involved in their finances. The study shows an upward trend in the role of women as the key decision-maker in their household – an incredible 95% are financial decision makers. Eighty four percent of married women are either solely or jointly responsible for household financial decisions. So where are the books and publications to help those women, who have been historically underserved, make the final decisions that will determine the long-term financial security for themselves and their families? Well, you could read Don’s 2008 book entitled, “Women & Mutual Funds: Gain Understanding and Be in Control,” and learn about mutual funds and the development of a portfolio. Or, before learning about mutual funds and portfolio building, and which the authors recommend, read “Women & Retirement Planning: Understanding Retirement Plans, Investment Choices and Retirement Plan Distributions,” and have at your fingertips an immense amount of useable information about retirement plans and related issues and a vast array of questions answered about your retirement plans, including: Why should I invest in a Roth IRA? Am I investing in the best retirement plans for me? Have I selected the best mutual funds for my 401(k)? When can I start taking distributions from my retirement plans? What is the best way to take these distributions? What are the income tax implications of taking distributions? These answers and more are contained within the following pages. Read on. Planning for retirement fifty years ago was simple when your first job was your one and only job. The above questions didn’t have to be asked. If you were in a nonunion position, retirement was taken care of by the company’s defined benefit plan and the government’s social security benefit. If your work was overseen by a union, retirement income consisted of the union’s pension and social security. Any other income that was needed was a result of your efforts to save during your working years. Nowadays, things are a bit more complex. Defined Benefit plans, while still in existence, are a virtual relic. Very few companies have them. Social Security remains viable, but…? The burden for your retirement has become your burden. No longer is planning for retirement the so called responsibility of your company and the government. To help you out, however, the government introduced additional ways to save for retirement. There is the IRA, which can either be a Roth or traditional IRA, 401(k), 403(b), 457, SEP-IRA, Profit Sharing, Money Purchase, Cash Balance, Defined Benefit, SIMPLE, SARSEP, Thrift, and so on. As the late Phil Rizzuto, former New York Yankee shortstop, member of the Baseball Hall of Fame and announcer, would exclaim, “Holy Cow!!!!” What is all this? How do I know what’s good, what’s best for me? Well, you’ve come to the right place. WHAT RETIREMENT PLAN IS BEST FOR YOU? Unfortunately, it’s not possible for us to say what’s best for you. Why? It’s because we don’t know you. We don’t personally know you – what you do, your personal and family needs, desires, goals, earning power, tolerance for risk, time frame to achieve your goals, and so on. What we have done, however, is to offer a detailed description of each of the plans that are available. If you’re an individual employee, you’ll be able to determine the best plan for yourself. Could it be a Roth IRA combined with your company’s 401(k)? Or, maybe it’s a traditional IRA combined with your organization’s 403(b)? If you’re a small business owner/entrepreneur, you’ll see the plans that may be best for you. Maybe it’s a Roth IRA and a Defined Benefit Plan? Perhaps it’s a traditional IRA combined with a Money Purchase Plan? If you’re an executive, you’ll find the plans that are best for you. Could it possibly be a traditional IRA, a 457, 401(k) and a Defined Benefit plan? Choosing the best plan or plans is extremely important. Normally, one does not make this decision too many times. Typically, such a decision is made only when there is a significant lifestyle change. So, be careful and choose wisely. WHY SHOULD YOU PARTICIPATE? The cost of retirement will probably continue to escalate every year. Health care costs will experience significant increases. Food costs will rise. Housing costs probably will not go lower. Entertainment costs will go up. And so on… Furthermore, people are living longer. In the Journal of Financial Service Professionals, Ronald F. Duska, PhD states, “Fifty years ago, when average life expectancy was 65, retirement was not much of an anxiety-producing event. In those days, if one lived past that age, retirement seemed like an extended vacation. However, with average life expectancy currently hovering at 85, a retirement when one’s age is in the late 60s or early 70s leaves the possibility of a person living another quarter of a century” . For example, in 1970, a 40 year old female could expect to live 37.8 more years. Today, a 40 year old female in the U.S. can expect to live another 40.8 years to 80.8 years. So not only are yearly retirement costs rising, retirement costs are increasing because women are living longer, also. How can this dilemma of managing the cost of retirement, be addressed? One way, is by participating in the plans that are best for you, choosing your investments wisely and investing regularly. WHAT TYPES OF WOMEN WOULD BENEFIT MOST FROM READING THIS BOOK? Personally, we think it’s the responsibility of all women to read this book. Whether you’re married or single, divorced or widowed, full-time or part-time, a professional or stay-at-home mom, ready for retirement or just beginning your career, Women & Retirement Planning: Understanding Retirement Plans, Investment Choices and Retirement Plan Distributions, is for you. If you wish to take responsibility for your retirement, this book offers a terrific starting point. There are books in the marketplace that talk about retirement. Some books even mention the IRA, or the 401(k), or other plan. However, the devil is in the detail. It’s crucial to know the details of any and all plans in which you’re participating or are considering participating. Even if you access the internet and spend countless hours navigating it to find the kind of information that’s in these pages, you may not be successful. The purpose of this book is to allow you to develop a basic understanding about retirement. We attempt to crystallize the main features of all available retirement plans, including contribution limits and deadlines for such contributions. We then go through an extended discussion of mutual funds. This includes a description of all the types of mutual funds that are available, offer some key factors to look at when selecting mutual funds, and talk about asset allocation. Why does the book spend three chapters on mutual funds? Because it is presently the most widely used investment vehicle inside these retirement plans. However, for those who are more adventurous, we offer an overview of other possible investment choices. After this discussion on mutual funds, we get to the heart and thesis of the book. We discuss the distribution rules for each retirement plan. This is followed by a discussion of distributions necessitated by the death of the account owner. And finally, this discussion on distributions is topped off with an introduction into several often used distribution strategies. Take a moment; peruse the contents. You’ll be happy with the manner in which the book is written. You’ll be happy with the information that can help with your decision making. So take that step that will make your efforts toward securing a better retirement a little easier