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How much money do you think you’ll need for retirement? Go ahead, visualize a figure. Now I’m going to throw you a curveball: if you’re a woman, you’ll need more than if you were a man. I know, this seems unfair. To give you a clear picture of the reasons why, I sat down for a podcast interview with David Bach, the author of Smart Women Finish Rich. David’s book has sold over a million copies and just had its 63rd printing, so suffice to say he’s somewhat an expert on the topic of women and money! David recently provided an updated edition for the book’s 20th Anniversary, so we had a great discussion surrounding the original reason for the book as well as what’s changed for women over the last 20 years. “80% of men die married, while 80% of women die widowed” In our interview, David shared some really powerful statistics. $39.6 trillion of the world’s wealth is now controlled by women. By 2020, that figure is expected to grow to $72 trillion. Women are playing a bigger role in the financial world every year. However, on average, women have accumulated 34% less in retirement accounts than men. Why is this? David explained that women are usually much less involved in the finances and overall retirement planning process than their husbands. If that’s true for you, David had an important message that you need to hear: “It’s neither safe nor practical to assume that the man in your life can be counted on to take care of your finances.” That’s a powerful statement, and the reason for it is this: 80% of men die married, while 80% of women die widowed. Your husband might be the one making the financial decisions now, but you’ll be the one living with those decisions (and whatever finances are left) once he’s gone. This leads into David’s original reason for the book. His own grandmother (who was poor at age 30 and became a self-made millionaire) taught him how to invest starting at age 7 with McDonald’s stock. Fast forward to David working in his father’s financial advisory business, which is where he learned that his grandma’s situation of being in charge of the money and investments was not the norm. David saw firsthand that widows who came in needed to be taught the basics of their financial plan and even how to write checks. Inspired by his grandmother, David knew he had to do something more to help, so he taught classes specifically for his female clients. Whether they were single or married, David’s goal was to teach them about their finances. After the very first seminar, he was asked for a book recommendation that would cover women and money, and there simply wasn’t one. Three years into teaching the class, people were pushing David to write the missing book, and the rest is history. The book’s mission was to teach women to be smart about money in order to protect themselves and their families, as well as teach their kids about money like his own grandmother had done. So what’s changed over the last 20 years? A few things! For one, the average age of widowhood used to be 56 and now it’s 59. A woman’s retirement could be 10-20 years longer than the man in their life, and they have to prepare for that. Women need to be setting aside more money than their husbands (think 20% more!) because they’ll be retired longer. And if the husband gets sick or needs additional care, that will eat up a lot of retirement savings. Another change is that the divorce rate among couples over the age of 50 has increased dramatically, to the tune of 109% higher than it was 20 years ago. People were simply not getting divorced in their 50s back then, and it’s because they weren’t expecting to live to 80 or beyond. Sadly, with life expectancy increasing, folks in their 50s and 60s are deciding that they don’t want to be married to their spouse for another 20 years “Ask yourself – what would you need to know about money tomorrow if your partner or spouse died?” These two changes, divorce and living longer, are usually financially devastating to women. Here’s why: when it comes to divorce, the pie (money and assets) gets divided. That’s often the first thing that’s fought over in court. If you don’t know how big the pie is, you won’t get half. Ideally, we’d hope for couples to stay together, but realistically, women have to be in the know about the finances. And it’s not just in case of divorce. If you become widowed, you’ll need to know everything about your money. Where is the will, the insurance, your 401(k) plans and IRA accounts – and what are they earning? It’s absolutely imperative to know this before going through a divorce or losing your spouse. Even if you hire a financial advisor, you yourself need to know what’s going on. If you’re married and you’re not involved with the finances or not having regular financial conversations, this is something to change now. So how do you bring that up with your spouse? How do you initiate that conversation? David suggested simply saying that you want to be on the same page, and he added that you can blame it on him! Tell your spouse that you read the book or listened to the podcast and you want to know what’s going on with the finances. And ask yourself – what would you need to know about money tomorrow if your partner or spouse died? Make a list of all your questions and there’s where you start. We’ll highlight a few more topics from this interview in another post, including what women do better than men with finances. In the meantime, head over to https://retirewithpurpose.com/podcast/david-bach-smart-women-finish-rich/ to listen to the full podcast. We’d love to hear your thoughts on this interview…Read more
[INTERVIEW] Casey: Welcome to Retire With Purpose and today we have a very special guest. Todd Tresidder is with us with FinancialMentor.com. Todd’s going to share with us some really insightful advice and I think we really want to start digging into where Todd is today and how we got there. So, Todd, first of all, welcome to the podcast. We’re excited to have you.Read more
Casey: Today’s guest is Dr. Wade Pfau. Wade is a Professor of Retirement Income at the American College of Financial Services holding a Doctorate in Economics from Princeton University and is a chartered financial analyst. He is a co-editor of the Journal of Personal Finance, founder of the Retirement Researcher Blog, Forbes contributor, and expert panelist for the Wall Street Journal. He has authored two books titled How Much Can I Spend in Retirement? and Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement, both of which we will discuss today. We will have a wide-ranging discussion beginning with challenges facing retirees transitioning into retirement, why you shouldn’t count on returns of 8% per year in retirement, and my favorite part as Dr. Pfau illustrates the different schools of thought when it comes to planning for retirement income, the investment versus insurance world, at odds for decades, but finally coming together to build more secure retirement strategies for today’s retirees. We will wrap up our conversation with discussions of reverse mortgages. I was very intrigued by Wade’s research into these tools that have garnered such negative publicity over the last decade. You may be surprised by the applications, some of which I had never even thought of. We have molded our retirement income strategies after much of the research he has conducted over the years. So, I hope you’re as thrilled as I am to engage in a discussion with the master of retirement income himself, Dr. Wade Pfau. [INTERVIEW] Casey: Welcome to Retire With Purpose Podcast. This is your host, Casey Weade, and joining me, Dr. Wade Pfau of the American College among many other things as I just reviewed with you and, doctor, welcome to the show. Dr. Wade: Thanks. Yeah. Thanks for having me on the air. Casey: Well, it’s something I’ve looked forward to for a long time. Ever since I went through your Retirement Income Certified Professional, RICP, course at the American College, I have always looked forward to an opportunity to have a discussion regarding a lot of the topics that are at the top of my mind and really the way that we structured our planning for the families we work with day in and day out. Yeah. I’m going not try not to be too selfish here and make sure that we get the focus a lot on your new books and that is going to be a good topic of discussion here, as we spend a little bit of time talking about your book, How Much Can I Spend In Retirement? And then later in the show I really want to spend some time getting into Reverse Mortgages which have a bit of a bad name in the financial world and I want to dig into that and see what you have to say about it. But first, I would really like to talk about retirement income planning and one of the analogies that you used in the book, you had a great chart that talked a little bit about mountain climbing and then so the dissent. So, you had this mountain climbing analogy for retirement. Can you expound on that a little bit? Dr. Wade: Yeah. That’s a common way to think about retirement. It’s like when you’re climbing a mountain, we often think the goal of mountain climbing is to get to the top and the reality is that’s not the whole story. You have to basically make it back down the mountain as well and for mountain climbing, getting down the mountain can be more dangerous than getting up the mountain. People are more tired and it’s easier to slip going downhill and so forth. And so, this analogy really works for retirement because with retirement, kind of the traditional mindset is we get to the top of the mountain, we meet some sort of wealth accumulation target, whatever that may be. If I save $1 million, I can retire, and something like that, but that’s not the whole story. It’s not just meeting a wealth goal that you can now retire. You have to actually get down the mountain which means you have to sustain your lifestyle for no matter how long you live, not knowing how long you’re going to live, not knowing what’s going to be happening in the financial market and so forth. But you have to be able to sustain your lifestyle in the face of all that. And the risks of retirement are different than the pre-retirement risk. It can be more difficult to get down the mountain so to speak too to sustain a lifestyle in retirement than it is climbing the mountain saving for retirement. Casey: So, would you say that it is easier to get to retirement through those accumulation years than it is to actually make that transition into retirement? Dr. Wade: Yeah. That’s the idea that a technical concept is pre-retirement people have more risk capacity, which just means they really have more flexibility to manage risk than they do post-retirement. Pre-retirement, you’re working, you’re saving a percentage of your salary for retirement but you’re living off of your earnings and if something goes wrong in the market and so forth, you can adjust your plan, save a little more, work a little longer, just generally have more flexibility but postretirement now you’re no longer working to the expense that it’s hard to go back to work. You don’t have that flexibility anymore. You can’t use your earnings to get over a market downturn. You have to now sustain your lifestyle in the face of the market volatility and the nature of risk changes, that’s kind of on the market side there’s this idea of sequence of return to it, the idea that it’s not just the average market return that’s going to impact your retirement, but the order that those returns come. And if…Read more