Wilma Consul: Hello. I'm Wilma Consul with an AARP Take On Today. It's no secret that women often face different financial challenges than men. From pay inequities during their working life to taking time off to serve as caregivers, or simply living longer. In a moment, Jean Chatzky, host of the AARP Closing the Savings Gap Podcast series will discuss how to take on these challenges. But first, let's hear from several women about their retirement savings strategies.
Sheryl Sherwin: My name is Sheryl Sherwin. I live here in Washington, D.C. I've been teaching English as a second language to adult immigrants for over 20 years. Wherever I have worked, I have always deducted the maximum amount that the company matched. When I got married, my husband and I have pretty equal perspectives on finances. We were very big on putting money aside and investing it because we didn't have children. We've built up a significant cushion. I would say when the time comes... I'm not ready to retire yet, but when the time comes, I think I'll be in good shape.
Karla Ramos: My name is Karla Ramos and I'm from El Salvador and I have been living in the US for 27 years. Since then, I've been working, going to be 47 next month and planning to retire at 50 years. Now, more than that, I want to have some quality of time while I can still enjoy life. Let me see, maybe 15 or 13 years ago, that's when I started saving on my 401k and since then I've being on the plan. So, hopefully by this time there are some money.
Marcia Lions: My name is Marcia Lions and I live in Silver Spring, Maryland. I retired April 28th, 2017, and I had been at my job for 27 years. The people that held our retirement account at work were in California and they came and they had a conversation with us about retirement. If you want to keep living the way you're living, this is how much money you need to have amassed, and for me it was about 300,000. Did I amass that much? Not really, who can! But you work with what you have. Retirement is great, it's wonderful. I don't regret one day of it. I was ready to go, but just be financially prepared because it may surprise you.
Wilma Consul: Earlier this year, AARP launched Closing the Savings Gap, a seven episode podcast series hosted by Jean Chatzky. Let's listen to a clip from the show.
Jean Chatzky: Over the course of this series, you'll meet women who have a retirement gap because of a common financial roadblock. It could be debt, overspending, undersaving, lack of confidence when it comes to investing. Don't be surprised if some of these stories sound familiar. My team has matched each of these women up with a financial planner who's taking them by the hand and helping them make the changes they need to retire with confidence and so that you can do the same.
Wilma Consul: Joining us now on the phone is the voice you just heard. It's Jean Chatzky. Besides being AARP Financial Ambassador, she hosts another podcast called HerMoney. Jean is also a financial editor for NBC Today, an award-winning personal finance journalist and best selling author. Jean, it's very nice to talk to you, especially after I've listened to your shows.
Jean Chatzky: Oh, thank you so much Wilma. Thank you for having me.
Wilma Consul: You and your producers designed the podcast to help women achieve financial security. Perhaps it might be best if you could explain to our listeners, what exactly is the retirement savings gap?
Jean Chatzky: It's the gap between how much women will have for retirement and how much women will need for retirement to live comfortably, to maintain the life that they have come to count on. And you know well that women are different than men in that we live longer than they do, that we are still the ones who take breaks from work to care for kids and care for older parents, that we still earn substantially less. And as a result, when we get to retirement, we have substantially less money and then because of those longevity figures, we need to make it last longer. That's the retirement gap. That's what we're focusing on.
Wilma Consul: Now, do men have retirement gaps as well?
Jean Chatzky: They do, but generally they are not as large and they're not as long lasting because men tend to die, sadly before we do.
Wilma Consul: Why did you decide to focus the podcast on women?
Jean Chatzky: I found women like to gather and talk about these issues with other women. In my weekly podcast, HerMoney, we've really created quite a community of women who get together on Facebook, get together to share their stories. Some get together in real life. These supportive environments have really been helpful in fostering the kind of change that we know we need to make in our own light in order to address these issues. For me, it was just a natural extension.
Wilma Consul: The episode on becoming debt-free and savings-rich, you talked to a woman named Sean who had health issues. Let's listen to her story.
Sean: There was still a lot of medical bills to pay. My insurance didn't cover everything.
Jean Chatzky: Oh my goodness.
Sean: And then there was a lot of follow up and things like that. And then about a year later I was laid off and I got sick again and ended up in and out of the emergency room and I was unemployed and couldn't really look for work between all the doctor visits and so I drained my savings. I emptied out my IRA. All of my safety net was burned up in this time.
Jean Chatzky: So you're starting over.
Sean: I am starting over from zero at 42.
Wilma Consul: A lot of women unfortunately have had to learn to start over. If faced with that situation, how should one do it? Where do we even start?
Jean Chatzky: I feel like I completely related to Sean because I was one of those women, not because of debt, but because of a divorce. I got divorced at 40. Fortunately I was employed and was able to rebuild my savings. But it really did feel like taking a step back. The way that we start to rebuild, no matter where we rebuilding from, is slowly. If you try to dig in and accomplish everything all at once, it feels a little like a crash diet that is unsustainable. It's much better if you can take some small steps, achieve those steps, then take slightly larger steps and keep going from there. We use technology to help us achieve those goals. In Sean's case, we talked a lot about the importance of automating and how you have to get in the habit of putting aside even small amounts of money for you on a regular basis and investing those funds in order to make up the ground.
Wilma Consul: I have to confess, I am one of those women too. I'm single, I have no children, right? I don't have a spouse or anything like that. But I was a freelancer for 10 years and I picked professions that didn't make a lot of money. Journalism, cheffing-
Jean Chatzky: Hello, yeah.
Wilma Consul: The kitchen, teaching fitness, right? So, how much should a person have in their savings just in case they lose a job? In those days it was three months and then it became six months. What is it nowadays?
Jean Chatzky: It's three to six months. But I don't want listeners to get frightened by that number. $2,000 goes an awfully long way. $2,000 can fix your car, it can pay a medical bill, it can repair your roof. And if you live really leanly, it can carry you through. A period of unemployment doesn't have to be a long one but a period of unemployment. So aim for $1,000, build it to $2,000 and then go from there. But don't focus on, oh my gosh, I must have six months of living expenses banked; because again, that's one of those goals that sounds so daunting that it's really tough to get there.
Wilma Consul: I know what you're saying because for the longest time I couldn't even get to a thousand, right? And I'm like, I felt so bad. Everything that you make is just really trying to survive for that week, for that month. Let me go back to Sean's story. She had health issues. How common is it to lose your savings to healthcare?
Jean Chatzky: It's the most common. When we look at bankruptcy statistics, the biggest cause of bankruptcies every year are health related issues that take us by surprise, which is why having insurance is so crucial. And even if you can't afford the sort of insurance that pays every time you go to the doctor, having the sort of insurance that pays when you have a medical catastrophe and will prevent you from becoming bankrupt is really important.
Wilma Consul: Another reason that women have financial difficulty sometimes comes from, sadly losing a spouse. You spoke with a widow named Michelle. After her husband died, she found it hard to manage a big house. Let's listen to her story.
Jean Chatzky: And I'm so sorry to hear that you lost your husband to cancer.
Michelle: Thank you for saying that. Thanks.
Jean Chatzky: Tell us a little bit about what the last year or so has been like for you and how this has impacted your finances.
Michelle: The one thing that kind of keeps me awake at night, and it is a bit of an albatross, which is, I'm in a house that's too big for me. It's overwhelming to hire people to do things, which seems like a waste of money. I'd feel like I'm spending money I don't need to be spending and I feel like I'm ready to rent out half of my house or sell it and move somewhere smaller, whether that's a rental or a different house that I buy. So, that's something that's been going on in the last little while.
Wilma Consul: After someone loses a spouse or after you've gotten a divorce, there are a lot of emotions, right, that's going on and all that. Now, sometimes it's hard to just kind of think about your finances. What is your advice to get someone kind of in their right frame of mind and get on track?
Jean Chatzky: This is one of those times in life when getting help is really, really important as is not making any fast decisions and fast moves. We hear a lot about women still who decide to stay in the family house after a divorce, even though it's truly unaffordable for them; and it sets them back financially for many, many years. Now, Michelle's case was different. She actually could afford to stay in that house. She just was exhausted from the time and energy that it took to manage it. But it took her several years coming out of that period of grieving to recognize that it was time to make some moves and to give herself the space and ammunition to figure out exactly what she needed to do. I mean, you heard her talk about the fact that she considered a number of options. She could keep the house and rent part of it out. We have to give ourselves space to both grieve the relationship, grieve the person, and process the numbers. And those are two very different things, which is why having a professional in the equation can help.
Wilma Consul: And that's what I liked about the podcast, is that you don't just talk about the problems, you actually offer the solutions and help the women by partnering them with a financial advisor. Tell me a little bit more about that.
Jean Chatzky: I've been a financial journalist, a personal financial journalist for going on three decades, which means I have a Rolodex build with... these days it's not a Rolodex, it's a contact list in my computer, but it's filled with the best financial planners in the country. We picked female financial advisors to work with these women who had skillsets that lined up nicely because just like people who are lawyers or people who are doctors, financial advisors have specialties. They have strengths, they have weaknesses. Some come from the world of investing, some come from the world of insurance, some are more holistic in nature. And we very carefully paired up these women who got in touch with us with their stories, with advisors that we felt would be able to work with them.
Wilma Consul: Now, if someone is looking for a financial advisor, what should people look for?
Jean Chatzky: I like someone who is able to not just look at your investments, not just look at your portfolio or your taxes or your insurance, but look at the whole picture. Focus on your goals and help you figure out a way to get from where you are today to where you want to be tomorrow. And that takes a special person. It takes somebody who understands how to listen more than they know how to sell themselves and their capabilities. And I do want to say there are plenty of men who are wonderful financial advisors as well, who have these capacities to be empathetic and to really think about what is important for the client.
But it is often important to understand how financial advisors get paid because they get paid in a number of different ways. You want to understand what that relationship is going to cost you in dollar terms. You want to understand if the planner has a dog in the hunt, if they make more money by selling you particular investments or if they are a fee only financial advisor where they are just taking a fee for either coming up with a plan or for the number of assets that you have under management. And there are a couple of good associations that you can turn to to find a financial advisor to work with you. The one that specializes in fee only advisors is called NAPFA, N-A-P-F-A, the National Association of Personal Financial Advisors, napfa.org, and they have a zip code locator.
Wilma Consul: Now, we also wanted to spotlight someone else in the podcast that you guys did. Her name is Narda. Now, she was concerned that she does not have enough life insurance. Let's listen in.
Jean Chatzky: When you say you're doing the minimum in your company for retirement, can you be a little bit more specific? How much are you putting away?
Narda: I put 7% in my 401k. But I'm in not very aggressive funds because I'm a little nervous about the market. I'm just really conservative when it comes to investing.
Jean Chatzky: And how about your husband? Does he have a retirement plan that he participates in?
Narda: Yes, he does. He is actually probably more of a risk taker, but I don't know the details of what he's invested in and not.
Wilma Consul: So, what can we say about Narda?
Jean Chatzky: In the sense that she's reluctant to take risks, particularly risks in the stock market, not a very, very typical of women. We see this in research, we see it in surveys. The problem with this need to be so safe and to put our money into secure vehicles is that it actually gets in the way of our financial security because if you leave your money in the bank or in a money market fund in your retirement account, it's not doing anything for you. It's barely, even in the case of the money market fund that's paying a competitive rate, it's barely keeping up with taxes and inflation.
If you want to make your money work for you, you have to have at least some of it in stocks and that means putting together an asset allocation, a mix of stocks and bonds and cash that makes sense based on your life stage and based on your tolerance for risk. With Narda, we talked about using the services of the financial advisor to make sure that she was taking the appropriate amount of risk for her. We also talked about having to know where her husband was in this summit. If he was putting money into a retirement account and being incredibly aggressive, as a couple, they may have balanced each other out. The problem was, they didn't know it. And so, the advisor worked with both of them in order to get them on the same page.
Wilma Consul: So, communication when you have a spouse.
Jean Chatzky: Yes.
Wilma Consul: I love that you've always been an advocate for women in investing and you've always told them to invest if they haven't already. Savings account don't provide a lot of interest, but many still depend on them to save for children's college funds. How does one strategize the balance between saving and investing?
Jean Chatzky: The money that you need in the short term should be in a savings account, despite the low returns. And by the way, you should be pretty aggressive about looking for those savings accounts that have the better returns. Right now, even with interest rates as low as they are, it's very possible to earn close to 2% on your money. You just have to do a quick Google search for the best savings accounts and move your money into one of those. Generally it'll be at a bank that does business through the internet rather than has a brick and mortar presence. I've had savings accounts like this for years, although I know sometimes people worry, are they safe? Yes, they are safe. They're real banks. So that's one thing. But the money that you need for the longer term, and when we talk longer term, we're talking three, four, five years or more, that should be invested. That's money where you have time to ride the ups and downs of the stock market.
Wilma Consul: We talk a lot about savings and all the financial difficulties. Sometimes, fun should be part of life, right?
Jean Chatzky: Absolutely.
Wilma Consul: Where does fun money fit into general financial planning? Especially when you're having financial trouble.
Jean Chatzky: It can be difficult to make it fit when you're having financial trouble. But once you dig your way out, once you have gotten yourself to a point where you are saving a good 15% of whatever it is you're earning for your future, and by the way, if you get matching dollars from your employer, you can include matching dollars in that 15%. Once you do that, the rest of your money is discretionary. It's up to you to do what you want. So you want to have a little more fun. Maybe you reduce the amount of money that you're spending on housing. Maybe you reduce the amount that you're spending on transportation.
Maybe you are more careful about the money that you're spending without thinking about it. The point that I try to make, and I have a whole chapter in my book about spending with joy is that we'll be happiest when we spend in a way that lines up with our values. When we spend without thinking about it, when we just swipe our cards or press the one click ordering button on the computer, it's too fast. We're not being conscious about how we're using our limited resources and we've got to take ourselves back to a point where we are.
Wilma Consul: Are there any projects that you're excited about that you want to tell the listeners, Jean?
Jean Chatzky: I'm very excited about my column in AARP Magazine. They've renamed it Chatzky to the rescue, which by the way was not my title. But if any of your listeners have a money problem that they're interested in having help with, we're taking a reader by the hand for each issue and helping them get answers to their questions and it's just been so much fun.
Wilma Consul: I look forward to that. I will definitely listen and I have enjoyed talking with you and thank you for all the information that you've provided our listeners. Thank you so much Jean.
Jean Chatzky: Thank you for having me.
Wilma Consul: It's never too late to start saving even if it means starting from scratch. Tune in to the AARP Closing the Savings Gap series at aarp.org/podcasts. Become a subscriber and be sure to rate our podcast on Apple Podcasts, Google Play, Stitcher, and other podcast apps. Thanks for listening. I'm Wilma Consul.
It’s no secret that women face different financial challenges than men. AARP Financial Ambassador Jean Chatzky discusses her podcast series, AARP Closing the Savings Gap, and how to take on these challenges.
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