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Sunday, February 8, 2004
Getting started

Playing catch-up

By Nan Connolly
Special to The Seattle Times

Retirement is an equal-opportunity expense: It costs a fortune for everyone. But women and people of color face particular challenges in funding it. Here are some of the problems — and strategies for tackling them.

The problem

Lower lifetime earnings

On average, women earn just 76 cents for every dollar men earn, a disparity virtually unchanged in 20 years. According to the Older Women's League (OWL), for African-American women it's 65 cents; for Latinas, 52 cents.

Black men earn 25 percent less than white men, and Hispanic men average 65 percent less.

Lower pay means less cash to save, smaller Social Security checks and lower pension payouts.

Four solutions

• Start a retirement savings plan as early as possible, even at the expense of other savings goals. "A little bit over a long time is a lot," says David Giannini, a broker at RBC Dain Rauscher in Seattle. "It all comes down to habit training; $50 to $100 a month is a start."

• Fund retirement, then a child's college account. There are no scholarships for retirement expenses.

• When your child outgrows day care, shift that monthly check into retirement savings.

• Earn more so you can save more. Career counselor Peggy Klaus thinks many women could earn more by asking for it: "If you don't brag or self-promote, you will stall or derail your career. Men do this (self-promotion) routinely."

The problem

Lower savings rates

For women, the average 401(k) account holds just $11,000, less than half what men have saved. Yet women who reach their mid-60s can expect to live an additional 17 years, some longer.

Paul Capeloto, a Smith Barney vice president in Bellevue, worries that low pay hampers retirement savings: "The workforce doesn't reflect the time value of what women do."

For those making less than $30,000 a year — which includes two out of three working women — the reality is that there isn't much left over to save.

Men of color have lower savings rates as well.

How to save more

• Contribute any bonuses, tax refunds, cash gifts, inheritances or divorce settlements to a retirement account. Don't spend even small windfalls.

• Adjust your W-4 statement so you don't get a big tax refund, which brings the temptation to spend. Save your "raise" via direct deposit.

• Save your tax breaks. Federal income-tax rates have been cut this year by 2 percent for most taxpayers with incomes of more than $28,400 for singles or $56,800 for those filing joint returns. Increase your savings accordingly.

The problem

Lower pensions and Social Security benefits

Because of lower earnings and time out of the workplace for family needs, women and people of color receive much lower Social Security payments than white men do. And just half of white women and 40 percent of minorities hold jobs with pensions.

Bear in mind

• Understand what you're sacrificing when you stop working to care for a child or aging relative. On average, women spend 11 years off the job to care for family members, compared with 16 months for men, according to the U.S. Department of Labor.

Some parents who take time away from paid work can continue making tax-advantaged IRA payments, depending on household income. See the IRS Web site:

• Carefully review the pension benefits, if any, when considering a job offer. If the employer has a minimal pension plan or none, fund an IRA. Working in a modestly paid job with no pension plan is a formula for old-age poverty unless you save.

For a reality check, use a retirement calculator ( or

• Job-hopping can be especially harmful to retirement security. In fields such as teaching and government work, vesting in a pension may be the most painless way to secure a retirement. Lateral moves in mid- to low-paid jobs can damage your retirement financial picture if you must start vesting in a pension all over again.

Run the numbers before walking away from 10 years or more vested in a pension plan.

Strategy Session

Stay-at-home spouse

If you're a stay-at-home spouse, here are three things you can do for your retirement:

• Take advantage of the Individual Retirement Account for a nonworking spouse. If you file a joint income tax return, you're eligible for this spousal IRA. You may contribute up to $3,000 a year.

"They need to have something on their own," says certified financial planner Bryan Clintsman, a certified financial planner at Clintsman Financial Planning "I see too many examples where one spouse is designated to be the working person in that couple. It puts a lot of risk on the retirement plan."

• Know what happens to your husband's pension when he dies. This will depend on what pension payout he chooses when he retires. This is a crucial decision.

Typically, workers have two options on how they want their pension money paid out:

The single life option gives a worker pension income for the rest of his or her life. It pays a higher monthly income because it's based on a "single life" — the worker's — and payments cease when the worker dies.

The joint and survivorship option pays a lower monthly income, but payments continue until the death of both you and your spouse.

"Overall, the joint and survivor option is typically the safest and most sound option for retirees," says Shashin Shah, a certified financial planner at Financial Design Group in Texas in Addison. "It may provide a smaller payout than a sole option, but the risk is too great for the nonemployee spouse in case of the employee's death."

• Know the rules of Social Security spousal benefits and what you're entitled to. For more information, go to the Social Security Administration Web site at

— Dallas Morning News

North Seattle, married, two college-age daughters


Profile: A microbiologist, she has worked in a laboratory of the Northwest Fisheries Science Center for 18 years and calculates she has 17 more years to go.

"I can't depend on Social Security and I don't expect inheritance," she says. "I know I'll depend on myself."

She aims to replace 80 percent or more of her $65,000 annual salary in retirement. To reach that goal she saves a whopping 14 percent of her pay in a tax-deferred account and also receives a 5 percent employer match.

She hopes her savings, 35-year pension and Social Security will finance a retirement with time for travel and gardening. With most of her adult life spent at one job, while living in the same North Seattle house, Paranjpye describes herself as conservative. Her portfolio reflects this, with never more than 30 percent invested in the stock market, often much less. "I have more in government bonds," she says. Bonds have lower rates of return than stocks do over time but are less volatile.

Paranjpye likes it that way. "Coming here from India at 22 was enough of a risk," she says with a laugh.

How's she doing? With a savings rate four times the national average and a stellar work ethic, Paranjpye is making good headway toward a secure retirement. Her reliance on government bonds, while a good match for her conservative investment philosophy, means she will have lower rates of return over time.

This is true even taking into account sharp stock-market downturns, says Scott Lummer, a California pension consultant. "For long-term investors," he predicts, "if stocks outpace bonds by only 1 percent each year for the next 20 years — and remember, they have typically beat bonds by 5 percentage points — you will more than make up for your losses in the bear market."


Women's Institute for a Secure Retirement: Nonprofit institute devoted to promoting economic long-term security for women; funded by Teresa Heinz Kerry. Extensive resources, links and fact sheets.

Women's Financial Network. Web site of Muriel Seibert, Wall Street female pioneer and financial expert.

"Rightfully Yours: How to Get Past-Due Child Support, Alimony and Your Ex's Pension," Gary A. Shulman, Self-Counsel Press, $15. Focuses on two issues of importance to a number of ex-spouses: How to secure your share of your ex-spouse's pension benefits earned during the marriage, and how to obtain past-due alimony and child support payments from your ex's pension, profit-sharing or 401(k) savings plan.

"How to Succeed in Business Without Being White," Earl G. Graves, HarperBusiness, $15. From the authoritative publisher of Black Enterprise, successful monthly magazine for African Americans in business.

American Savings Education Council's site is filled with interactive worksheets and calculators, in Spanish as well as English.

"Making the Most of Your Money," Jane Bryant Quinn, Simon & Schuster, 1997, $30. One-thousand authoritative pages about every conceivable legal investment strategy, including the pros and cons of different retirement products.

"Women and Retirement Savings," and "QDROs: The Division of Pensions through Qualified Domestic Relations Orders" (for example, divorce orders). Request these two, free booklets from the Employee Benefits Security Administration at 800-998-7542.

"Social Security: What Every Woman Should Know." Call the Social Security Administration at 800-772-1213 for this free booklet, or visit

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