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Thursday, December 1, 2016

The Possible Perils of Baby Boomer Women

I never knew my paternal grandfather. He died about six months after I was born when he was in his mid-seventies, leaving my 68-year-old grandmother a widow. She lived another 23 years, in a kind of poverty I never fully understood, until she was 91. I know that she had a tiny Social Security pension that was used to pay rent in government-subsidized housing, buy food, and pay utilities. 

She even did some traveling, occasionally taking the train from Chicago to visit her two widowed sisters and a daughter in Southern California. She somehow remained independent, until near the end, suffering from dementia, she moved in with my aunt, her second-oldest daughter. 

I was in graduate school in Italy when I learned of her death. I mention this here because, while her story was somewhat unusual for her time, it is a story that will be repeated, with few exceptions, now, 40 or 50 years later, for the vast majority of Baby Boomer women who are alive today.

In an article published in 2006-2007 by the Global Generations Policy Initiative, Inc., entitled Financial Hurdles Confronting Baby Boomer Women, the author, Estelle James, discusses the challenges that will face most Baby Boomer women in the near future. While much of what she says is alarming, especially if you are hearing it for the first time, or haven’t anticipated it, she still remains positive that proper planning, begun now, can mitigate many of the negative aspects that retirement and growing older may present. 

The very first thing that women of this generation must do is ask themselves several important questions and seek the best possible answers for them. The questions posed in Ms. James article are these:• Will Social Security be a viable option for me? What is its future and will I receive a benefit from it?• Will I have other income like a pension plan to fall back on?• Will Medicare be sufficient to cover my medical costs or will I need some kind of a supplement?• As I end my working career, what kind of lifestyle do I want, and can I afford it?• Will I need to continue to work, at least part-time?• Will stock market ups and downs affect my lifestyle, and what can I do about it?• If my health fails, will I need a long-term-care insurance policy?

These questions are universal for those currently approaching retirement, but, for many reasons, they are most poignant for the women of this generation. Statistics show that most women will outlive their husbands and live their final years alone. Because most women also marry men who are older than they are, they will survive on their own for 7 to 10 years or longer. Inequities built into the system we live in makes it more difficult for these surviving women because of lower survivor benefits. 

Social Security gives surviving women the option of their husband’s survivor benefit or a benefit based on their own work experience, but not both. Because women generally work less and get paid less, both choices are pretty dismal. Conventional wisdom says that if you have two people living together and one dies, the survivor can live on 50% of what she did before. 

This simply isn’t true. Studies show that, because of fixed expenses that don’t change with the death of a spouse, a survivor needs 70% of the previous income to maintain the same lifestyle. Families need to plan for these things early on in order to avoid tragedy and marginalization when the exigencies of life happen. Without good planning, we could be on course to create a pocket of aged, widowed women who are living in the most dreadful poverty, the likes of which they never expected and which they certainly don’t deserve.What can be done to prevent much of this from happening? 

The first word that comes to mind has already been mentioned above – planning. The second is one that comes before planning and is, perhaps, more important and that is education. There is no reason why women, universally, should not be as knowledgeable about finances and stock market issues, banking and saving, and all the financial matters that are so vitally important to a secure future. I know that it’s easier to divide up the responsibilities among married couples. He takes out the garbage and mows the lawn. She does the cooking and cleaning. He takes care of the finances and she handles the shopping. Well and good until you’re left alone with no experience in taking care of all those major, daunting responsibilities. 

So, learn. Learn about money and all the ways it can work for you. Become an expert and maybe even teach your husband a thing or two. Of course, I don’t want to overlook all those women who have been on their own for many years because of separation or divorce and all the other societal issues that face our modern world. As we have recommended in all of our articles – sit with a financial planner from Grilo Enterprises. 

Talk to someone who knows what she or he is talking about. Learn from a person who can break it all down for you so you can understand, take positive action, and have a workable plan for your future.Know about these things, too. As they stand, Social Security and Medicare will not provide sufficient income and coverage for you to live comfortably. If they are not seriously reformed, both will have to cut back on benefits. You must have a supplemental source of income. It is probably wise to work, at least part time after age 65. 

Did you know that, for most Baby Boomers, if you wait until 70 to retire you will receive 132% of your Social Security benefits? That could make a huge difference. On the other side of the coin, retiring early (due to general frustration or a desire for more leisure) at age 62 will leave you with only 75% of your benefit for the rest of your life. Remember, with current life expectancies, you could be retired for as long as you were actively working. Extending your work life just makes sense. While you are working, save some of your money in an independent account (one that just belongs to you). Manage it yourself (with the help of one of our financial planners). 

Your planner from our firm has tools to show you exactly how much you should be saving to maintain your expected lifestyle. As experienced planners, we can say with certainty that almost no one is saving enough. Listen to us. We can also help you to put your savings in the right kind of account that gets a generous return, but is guaranteed against downturns in the stock market.We could also talk here about becoming better informed about legislation that may affect you and your savings. 

Pay attention to Congressional activity that could positively affect you or could make things more difficult. There are good organizations you can become active with that educate and motivate for legislation that could be of help to you. Become involved.In short, learn more, become more involved, take a more active role in your own future and your own well-being. We here at Grilo Enterprises have taken the time to make ourselves experts in these topics so that we can be of assistance to you. We are anxious to teach you what we know so that the future you envision for yourself will be there for you. Let us be of value to you and those you know.