AVOIDING INVESTMENT MISTAKES
According to Calling the Shots: Women Baby Boomers in Control of Their Financial Future, only one in three women considers herself knowledgeable about investing. In addition, nearly two-thirds feel they haven’t saved enough for their retirement and are afraid of outliving their savings.
Like anything, we put off what we don’t understand. Don’t let your retirement be one of those things. You can start investing today for as little as $50 per month. Setting aside even the smallest amounts now may pay off down the road. Think you’re too busy? Investing takes less time than you think—try to work it into your schedule.
Common investment mistakes:
Women invest later in life and more conservatively than men.
Because women, on average, live longer than men we actually need to start younger and invest more aggressively. A more conservative approach to investing increases the chances that our retirement dollars will be eaten up by inflation by the time we actually reach our retirement years. Besides, the earlier you start, the greater the effect compounding can have on your investments.
Women are less likely to participate in 401(k) programs than their male counterparts, and when they do participate, are too conservative in their investment approach.
If your employer offers a retirement plan—participate. You’re never too young or too old to begin planning and saving for your retirement. Remember, if you’re in the 28% tax bracket, one dollar out of every four you invest in your pre-tax retirement account is paid for by a reduction in your taxes rather than a change in your take-home pay. Also, be sure to invest enough to qualify for your employer’s match if such a program is in place where you work. Don’t forget that, in general, the longer you have until retirement, the more growth-oriented your investments should be.
Many women fail to evaluate their investments to be sure the rate of return is ahead of inflation and taxes.
Just making good investments isn’t enough. You need to monitor those investments to be sure your money is working as hard as it can for your future. Be sure to re-evaluate your investments periodically to make sure your investment program is keeping ahead of inflation and taxes. With a woman’s longer life expectancy, you need to make sure inflation isn’t eating away at the value of your nest egg. Completing an annual evaluation will make sure you’re not caught by surprise.
Women feel that investing in their children’s college education is more important than investing in their own retirement.
We all want our kids to have the best education money can buy. But if you save for college in lieu of retirement, you better hope your children land high-paying jobs and can afford to take care of you when you’re short on retirement dollars. After all, your children can borrow money to pay for their education, but no one is going to lend you money to subsidize your retirement. And don’t forget the many other forms of assistance, such as scholarships, financial aid, and work-study programs that can help your children through those college years.
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