Women Earn Less, Spend Less Time Working and Need More Money For Retirement. Here’s How Female Investors Can Make Sure Their Money Lasts a Lifetime.
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The financial deck is stacked against women:

• Women earn an average of 73 cents for every $1 men earn, according to the Women’s Institute for a Secure Retirement.
   
• Women spend a total of 11.5 years off the job to care for children or parents, compared with less than 1.5 years for men, according to the Bureau for Labor Statistics.
   
• That lower salary and those "missing years" translate into lower Social Security benefits, 401(k) contributions and other sources of retirement income.
   
• Women statistically outlive men. The average 45-year-old woman today is likely to live to be almost 82 years old; the average life expectancy of a 45-year-old man is less than 78 years. That means women must fund a longer retirement than men.

Bottom line: On average, women have fewer financial resources yet must stretch those resources longer than men.

No wonder more and more women are taking their financial futures into their own hands. Historically, women were not empowered to make their own financial choices. Those choices were made by men—either their husbands or their fathers. We’re seeing a significant increase in the number of women who are actively managing their own assets.

More investment know-how
The statistics on women and money have been disheartening, to say the least. But new research shows that women have become more savvy and successful investors during the past decade.
 

 
In 1992, 62 percent of women participating in a Money/Oppenheimer Funds survey couldn’t explain how a mutual fund worked. Only half were involved in their family’s investment decisions.

Ten years later, the same survey found that more than half the women participating knew how mutual funds worked, 63 percent were involved in the family’s investment decisions, and 83 percent were involved in saving and investing for their own retirement.

In several studies, women have outinvested men:

• Women’s portfolios performed better than men’s in a study of 35,000 discount brokerage customers by Odean and Barber.
   
• All-female investment clubs had returns of 10 percent more on average than all-male groups and almost 5 percent more than coed groups in 1999, according to the National Association of Investors Corporation.
   
• A plurality of top-performing investment clubs were all female, according to a 2000 Value Line study.

No wonder nearly 80 percent of women participating in the Money/Oppenheimer survey said they were more knowledgeable about investing today than they were five years ago.

How to invest if you’re a woman
Of course, most of the guidelines for investing are the same for women as for men.

"Develop an investment plan founded on your financial goals, risk tolerance and time horizon, and stick to it," Van Osdol says. "Allocate your assets based on your long-term strategic plan, not on market fluctuations."

But in addition to these investing basics, there are a few strategies that women should pay special attention to:

• Invest for the long haul. The average woman lives to age 80, the average man to age 74. That means that, on average, women outlive men by six years. That’s six more years of retirement to fund.

So if you’re a woman in your 50s, you may have a time horizon of 30 years. The longer your time horizon, the more of your assets should be invested in equities.

The problem: Most women invest more conservatively than men.

"There’s even more reason to choose equities now, thanks to the 2003 Tax Act," Van Osdol says. "The new tax law provides the same tax treatment for common stock dividends as long-term capital gains at the lower rate of 15 percent. At the same time, coupon payments from bonds are taxed as ordinary income, presumably at higher rates. So this may be a good time for women and men to re-evaluate the after-tax returns from their fixed-income investments."

Investing for the long haul also means starting earlier and investing longer. Of course, the longer you save, the harder the magic of compounding works in your favor.

• Don’t stop investing because you’re not working. If you do leave the work- force temporarily to raise children or care for aging parents, continue to save for retirement via a spousal IRA. You can contribute $3,000 a year, which may be tax deductible.
   
• Stick with the program. Don’t raid the retirement fund for nonretirement projects—remodeling the kitchen, say, or funding a daughter’s dream wedding.

"The key to a long-term strategic financial plan is to stick with it until you’ve achieved your goal," Van Osdol says. "If the goal is funding your retirement, don’t get sidetracked by worthy but tangential objectives."

A woman’s advantage
Women seem to have some investing traits that work in their favor. As a group, women tend to trade less often, be less likely to act on a hot tip and keep more of their money in mutual funds than men do.

Women are also more likely to do the research before investing. One study found that women spend 40 percent more time researching a mutual fund before they invest, according to the Women’s Financial Network at Siebert.

Add those approaches to a disciplined, strategic financial plan, and you’ve got an investing style you can count on—whether you’re a woman or a man. Click here for more information on investing