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Moms (and Women) and Yet Another Study About Investing

Perhaps I am just too jaded after years of reading white papers and studies, magazines and newspapers. Perhaps when it comes to anything that resembles a profile of a group, done by a big insurance company in an effort to understand how you invest, plan for retirement, or deal with your finances, I just can’t help but wonder if their motives are true, or worse, if we even expect them to be.

When you begin Prudential’s report, this one titled “Financial Experience & Behaviors Among Women,” it seems so complimentary. Women are decision makers and caregivers and, as a result, have had to engage, become aware, and begin to actively manage their financial affairs. Women, like the vast majority of us, have come to grips, it seems, with the concept that we will have to work longer in order to achieve any sort of financial security. Women need products. The study was done for the express purpose of selling this group something they may or may not need. So what do you suppose they found and how can we understand what is at stake in this study?

What Prudential found was that the vast majority of those surveyed (1250 women were polled) were moms. Half of the group fell into the category of late or early boomers, of which most were fully employed (48 percent worked full time and 7 percent were self-employed) and had investable assets (which includes savings and assets already accumulated) of more that $100,000.

Even though these women are actively involved in their households’ financial decisions and they take a role in the retirement-planning process, the survey says little about how the ultimate decision about what to do next is made, and by whom. But with 25 percent of those surveyed in charge of all of the decisions, an opportunity presents itself for the company.

Women are optimistic and it seems pragmatic as well. They know they have to work longer but they really don’t think they will have to—if their confidence in their ability to play catch-up is any indication. A full 55 percent believe that they can recover from whatever setbacks the market has done to their finances and possibly retire when they want, on schedule with what they see as the retirement goal. This in spite of the fact that they readily admit they need help with the choices of financial products to do so (90 percent), with a third of the respondents suggesting that help was really needed.

Although they cite that women have a limited knowledge of tools such as annuities, mutual funds, and what they refer to as individual securities, they offer no such evidence that they lag behind men. This isn’t a comparison survey. My experience in this area suggests that women are more ready to admit the shortcomings of their knowledge, which makes Prudential’s results of interest to everyone.

With women gaining ground in the workplace (men, in terms of full employment have now fallen behind women during the latest rounds of employment adjustments), the importance of a financial plan, at least one you are confident in, has moved to the forefront. Yet only one in three women have what they would call a plan in place with nine of ten twenty-five to thirty-four-year-olds surveyed have nothing. The “I-have-short-term-obligations” was the main reason for the shortfall among the youngest workers. And the problem it seems, is trust. Women network, seeking advice on these decisions from friends and family, with fewer than 20 percent seeking professional help.

Do men prioritize the need for having enough money to maintain their lifestyle more than do women? I doubt it and wonder, if only 14 percent of those women questioned think they do, where does that leave the retirement picture in terms of the general populace? If women tend to not trust the advisement community and they look toward their network for help instead, if they look at all, who can women blame for the fact that 76 percent believe that retirement on time—I’m assuming that means the traditional age of sixty-five years old—is not really possible? Can being cautious, saving more but still lagging behind the education needed to switch that feeling be anyone’s fault but their own?

The survey did uncover this lack of confidence with only 7 percent suggesting they had a plan and believed in it. It also unearthed several curiosities as well as a few surprises. Women know about retirement plans where the work but profess to know little about the mutual funds that dominate them. Annuities are still mystifying, a hybrid product of insurance and investments, usually mutual funds—and the insurance business likes it that way. And even though it is well documented that women will live longer than their male counterparts, long-term care insurance is not well understood.

The surprises present opportunities for the investment advisor community by the bucket load. Half of the women have life insurance, a third have a will, less have a disability policy and almost half have never even discussed the possibility that they may need assisted-living arrangements.

The bottom line, at least to financial professionals is to get women focused on their futures in terms of the products they need. But many services these professionals offer are already available with very little time invested.

If you are young to middle-aged, the cost of beginning (when you are eligible to participate in your company’s plan) your road to retirement can be a simple as allocating 5 percent of your pre-tax income. Not only will this leave your take-home pay intact, allowing you to take care of those short-term obligations, it will be a good step in the right direction. If you know nothing about investing, choose the total market or S&P500 index to start. You can always change it later—and you will have to at some point—but for now, getting something invested is better than nothing.

Get yourself some term life insurance. For women, it is far cheaper than the same product is for men and worth just as much. If there are kids at home, get a will. Next, designate beneficiaries. It is important to name someone on each investment, insurance policy, and in the will.

Get your household finances in order. Nothing sets back the overall plan more than too much outgoing cash compared to incoming. You can save more. But understand that savings and investing are two different things. Savings has no risk; investing has some, in some cases, a lot. You will need to focus on two years’ worth of dedicated savings in order to achieve at least three months worth of emergency savings. Once that is done, it will be time to focus on the investing part of the scenario. Just remember, the household budget is the foundation of every plan you might want to develop.

Now look for a disability policy to protect you from lost income. These policies come relatively cheap and can offer you a great deal of confidence. The cost of the policy will be considerably lower if you don’t need the money from it right away—which is why you need the three months expenses to cover the gap between the time the policy goes into effect and whatever reason you might have for not being able to work.

Nothing will build confidence that you are the right financial course than knowing that you have covered most of the contingencies without the help of a professional. But by this time, you will have developed, almost by default, a working knowledge of who you are, what you want, and have a rudimentary knowledge of how financial products work.

The next step is going back to your retirement plan, availing yourself of the help and education that is often provided there (and here) and begin to increase your contribution in tandem with your increased knowledge.

Is it really that simple? Yes. Will it take you just as long doing it alone as it would with an agent from an insurance agent helping? Yes, again. Do I believe it can be done? I believe that everyone is capable, women perhaps more so.

So no offense Prudential, but an insurance company is not and should not be the choice of those who currently don’t know what to do.

You can download the study as a pdf here.

Paul Petillo is the managing editor of and regular contributor to MomsMakingaMillion Radio