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Happily ever after?: How to avoid the roadblocks to financial security

July 9, 2007

Happily e ver after? How to avoid the roadblocks to financial security

In her new book, "The Feminine Mistake," author Leslie Bennetts cautions women to seriously consider the financial consequences of exiting the workplace to be a stayat-home wife and mom.

The former journalist and Vanity Fair writer says "few intelligent people would sink a lot of money into refurbishing a rental, but stay-athome wives think nothing of subordinating their own financial interests to those of their husbands, blithely assuming that those interests will never diverge."

Indianapolis resident Molly Quinn, a college-educated, divorced mother of three, can identify with Bennetts' assessment. Quinn, 39, was a stay-athome mom when her husband left her and their three small children five years ago. She had to get a job, buy a house and go through mediation to avoid paying half of the credit card debt he had amassed without her knowledge. And her husband now owes her more than $11,000 in child support.

"Looking back, I wish I'd kept my nose in the checkbook more, kept separate finances and worked at least part-time," Quinn said.

Elizabeth Bates, 43, a divorced mother of one, says her biggest challenge was re-entering the work force after being a stay-athome-mom. "My regrets go back to college. I wish I'd planned for a better income-producing profession," she said of her undergraduate theology degree. "I just didn't have direction at that young age. I thought I'd grow up, be married and have kids."

If she had it to do over, Bates says she would have stayed in the work force. Today, she works as an office manager and loves it. She plans to continue working

and advises her daughter to

do the same.

Life changes

take their toll

Local nurse practitioner

Shelley Morrow, 43, found

herself in charge of her own finances after her husband died of cancer at age 40. She also became a single parent to their 7-year-old son. The couple had a financial plan, health insurance and life insurance. Morrow remembers that their insurance agent discouraged them from buying a larger life insurance policy, but after her husband's death, Morrow says she "would have liked to have been over-insured."

Andrew Concannon, chief investment officer for Indianapolis-based Goelzer Investment Management, recommends that women seek out an investment adviser-an attorney, accountant or maybe even a family member-someone they are familiar with and can trust. "If something were to happen, you need to be comfortable going to this person for help," he said. A divorce, illness, or death is stressful enough without having to deal with a fuzzy financial picture.

When her husband was ill, Morrow turned to her brother-inlaw for help. He was an attorney and could answer the questions she had about protecting herself and her son. She still asks him questions about financial planning. "I think he just doesn't want to have to take care of me," Morrow joked. "I needed outside help to ensure that I wouldn't end up on skid row."

That fear can paralyze women, who don't know which way to turn when planning for their financial future. Olivia Mellan, a Washington, D.C., therapist and author of "The Advisor's Guide to Money Psychology," says women often worry about becoming bag ladies if their financial situation changes.

Lisa Schlehuber, CEO of Indianapolis-based Eli Lilly Federal Credit Union, says because women are typically the caregivers, they often forget to take care of themselves. In 2005, there were 21 million women over age 65 in the United States. That number is expected to grow to 48 million by 2050, according to the U.S. Census Bureau. The Labor Department estimates that nearly 90 percent of women will end up managing their own finances.

Learn to save

If women are working, they need to be saving, said Elaine Bedel, president of Indianapolisbased Bedel Financial Consulting Inc.

"Anyone working can set up an IRA through a bank or credit union, firms such as Charles Schwab and through brokerage houses." She recommends contributing the maximum amount allowed. Both Quinn and Bates received their husbands' 401(k) accounts as part of their divorce settlements, but neither has added funds since returning to work.

They're not alone. David J. Adams, former executive director of the Indiana Public Employees Retirement Fund, says that very few of the 220,000 PERF members contribute more than 3 percent of their pay toward retirement (they can contribute up to 10 percent). People don't understand what they'll need in retirement, he said. "I think as more baby boomers move towards retirement, financial education and programs that are easier to understand will be provided."

"It's so important for women to learn early that what you think life is going to be like isn't always true," said Anna Bryant, a 63-year-old retired teacher in Indianapolis who was widowed at age 40, when her daughter was 12. After her husband died, Bryant said she became "keenly interested in financial planning."

Bryant and her husband were thorough planners and maximized their retirement contributions. They had paid off their home before their daughter was born and carried no debt. They also carried no life insurance. "I thought my education was our life insurance," Bryant said. After her husband's death, Bryant took the Social Security payments that her daughter received and conservatively invested them. Those investments grew to more than $60,000 and helped pay for her daughter's Ivy League education.

Bryant planned well and loves retirement. She receives a teacher's pension, Social Security and investment income, but said her pension would be higher if she hadn't stayed home for three years after her daughter was born. Bryant figures that adjusting for the loss of salary, lost contributions to her pension and lost interest, staying home for three years probably cost her about $250,000 over time.

Bedel said she sometimes sees people so fearful of running out of money that they won't spend anything. After Bryant's husband died she was so scared about finances that she recorded everything she spent.

"To this day, I account for every penny, spending-wise and saving-wise," she said. She also compares year-to-year expenses to see where she is financially.

The Women's Institute for a Secure Retirement Web site, www.wiser.heinz.org, is a good source of financial advice and offers numerous planning tools and a quarterly e-mail newsletter, WISERWoman.

Financial planning is a lifelong learning process, said Deborah Bennett, managing director of Carmel-based Oxford Financial Group Ltd. "The earlier you start, the better," she advises, "but it is never too late [to begin]."
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