January 01 2008

Seven Financial Tips for Women and Men For 2008

1. Invest more. To make up for discrepancies in retirement benefits, people should consider investing more. For example, a person who takes seven years off from a 40-year career can expect to receive only half the pension benefits of someone with 40 years of uninterrupted services. The good news is that the U.S. Department of Labor reports that in an economy where the earnings of almost all other groups have remained the same or decreased, earnings of women have increased. Higher earnings for women should mean the potential for more investments.

2. Know your risk tolerance. Consider how much risk you are willing to take in exchange for the potential to earn higher returns. Historically, equity investments have provided higher returns over the long term than less-risky investments, such as money markets and short-term bonds, although past performance is no guarantee of future results.

3. Participate in employer plans. Collect information about the retirement benefits that are available through your employer and actively participate in any plans offered, taking advantage of all possible company matches and tax-deferred contributions.

4. Do not depend on pensions or Social Security. Fewer years in the work force, fewer years with a single employer and lower pay all may contribute to a lower average pension for retirees. Women also tend to receive lower Social Security benefits than men. Benefits are calculated based on a persons highest 35 years of earnings. If the benefits recipient doesnt have 35 years in the work force, the Social Security Administration will add zero-earnings years to the record to equal 35 years. This will lower the average monthly earnings figure and may significantly lower your benefits.

5. Get out of debt now. Debt is a serious issue. However, credit counselors report that espc women are more likely than men to take the first step toward becoming more disciplined and reducing their debt. First, understand your spending and reduce spending so you dont continue to add to your debt. Then attack your existing debt by paying off high-rate debt first and if possible transferring high-rate debt to lower rate credit cards.

6. Do tax planning. With more female business owners and more single women buying homes and qualifying for mortgage interest and property tax deductions, tax planning is becoming an integral part of everry persons financial lives. If possible, always contribute the maximum amount to your IRA and/or 401(k) and maximize your tax deductions.

7. Keep retirement top of mind. Although women have made many impressive strides toward financial independence, they report having only half as much for retirement as men ($40,000 in annual retirement income for women vs. $80,000 for men). Generally, because women live longer than men, they should save 12% of their gross income for retirement, rather than just 10%.