Bad things happen to good women

The death of a husband, a late-life divorce, a series of strokes or suddenly losing your job can all push older women into financial dire straits, writes Renata Singer.

I’m in my sixties, galloping towards 70. I own my home, have a tidy sum saved in superannuation, and some other investments.

I’ve done everything I can to make sure I’m financially okay in my old age, including putting assets in my name in case my husband runs off with a floozy. Still, I am worried. I could live another 30 years and how the hell can I predict what’s going to happen in that time. I wouldn’t have predicted that I’d get zero per cent interest on my US savings account and a measly 3.7 per cent — and still falling — for money I put into a fixed-term deposit in Australia. With inflation at around 3 per cent this is not a good investment. When I bought my first house I paid 17 per cent interest on my loan, and that was 30 years ago.

No wonder I’m worried, and the hotshot economists and bankers out there are no better at predicting the future than I am.

They can’t even tell when the property boom will go bust this time round. Meanwhile my anxiety is being raised to stress level by threats of cuts to the age pension, raising the age of eligibility, and the whole atmosphere of blaming us — the boomers — for more or less everything, and especially government deficits. We’re being attacked as ‘blood suckers’, when the reality is that more of us have jobs than ever before, and even more would be working if there were jobs and less discrimination against employing us.

With only 40 per cent of taxes coming from people’s wages there is a big 60 per cent of government income that has nothing to do with the ageing of the population.

Even if the government stops using the over 65s as their economic whipping posts, changes to the age pension, to superannuation benefits, to interest rates, and in the ups and downs of the economy are inevitable and unpredictable. Our first lesson is that no matter what financial advisers and economic soothsayers tell us, there is no sure-fire, absolute security that will ensure us a comfortable or even adequate income for the next three decades.

Anything could happen so we need to be prepared for change and insecurity. Thirty years is a long time.

Women and money

Meanwhile, in the here and now, many of my friends are already struggling financially. Alice has moved to the backblocks of nowhere — too far away for anyone to visit her — so that she can rent out her inner-city house and try to live on the difference between the rent she gets and the rent she pays. Another friend is shacking up, illegally — if Centrelink finds out she’s cohabiting they’ll cut off the part age pension she gets. If she tells them and the relationship doesn’t work out, it will take months of paperwork and meetings for her to get back that part pension she can’t manage without.

When you’re widowed, the negative financial fallout persists over time, long after you get over the emotional trauma. A survey of 4,000 women aged 76 to 81 found that because they weren’t used to managing alone they stayed worse off financially. The report’s recommendation was for financial advice to be made available in those first years of widowhood.

The death of a husband, a late-life divorce, a series of strokes or suddenly losing your job can all push you into financial no woman’s land.

What about the women now in their 50s and 60s who missed out on education and skills, never had or lost their home, and have little or no super because they worked cash-in-hand or casual jobs like taxi driving and house cleaning? Bad luck? Yes, partly, but also poor financial management. The sad fact is that most women are not financially literate — they have never been encouraged to understand money and have been happy to leave the finances to someone else to worry about. When I ask Betty Walton if she had any money worries at 87 she says, ‘Oh, no, I have never been interested in money, I am not materialistic at all,’ which didn’t actually answer my question. Many women share the view instilled into Betty by her Dad: ‘My father brought me up to think it was distasteful to talk about money.’

Although I asked women about money, very few gave specific answers. Only Bertha Lowitt describes her income in actual dollars. The others talk about ‘being comfortable’, their answers often more vague and euphemistic than even the ones they gave about sex. Not talking about money is bad enough but women often don’t think about it either, certainly not enough to plan ahead for retirement. They do not realise that they are likely to be retired for decades. And because they don’t budget they have no idea what they spend their money on. On top of all this women are highly risk averse — probably because of their lack of confidence in money matters — and will keep any money they do have in bank accounts or fixed-term deposits. This financial strategy is especially foolish when interest rates are low, as they are now. After inflation is taken into account, they are actually losing money. At the least we need to be interested in money and know that we need financial education.

We could be good with money. There is nothing innate about women being risk averse or less financially literate. Many studies have shown that financial know-how reflects income, assets and time constraints — not gender. High-end earning women are just as astute with their money, if not more so, than men.

Where to from here?

When I plan what I’m doing it’s at most a year or so in advance, whether it’s being ready to leave that job, finish writing this book, or wanting to take a trip to Western Australia. But with money it’s different, especially once you hit 50. Planning for a year or two is not enough. We all need longer term money strategies because in five, 10 or 20 years we’ll stop earning a salary. And because there are so many unknowns when we look ahead more than a few years, we’ve got to hedge our bets.

The age pension is very important to Australian women: 73 per cent of those who receive the single rate of the age pension are women. No one knows how eligibility criteria for the age pension will change in the future so we must avoid relying on it alone to support us in old age. We can and should get involved in trying to influence government and superannuation providers to make fairer policies. I’m happy to support the raising of the pension age to 70 but only as long as there are jobs for all those over 50 who want and need them. I’m also fine about tightening eligibility criteria as long as they only impact the rich and the rorters. I see no hands raised in favour of keeping any free perks for retired members of parliament, who already get extremely generous super payouts. But I’m not running the country.

Finance experts warn us that we’d be ‘nuts’ to expect to rely on a pension 20 or 30 years from now. And it’s the same with super. Who knows whether the highly advantageous tax policies will survive or how the stock market will move. Ditto the housing market. The three-prong approach is essential: a debt-free home, a decent super nest egg, and the age pension as a safety net.

Remember though, if you don’t achieve your aim of financial security or even near it, you’ve still got your health, your family and your friends, and you’re likelier to be happier than you’ve ever been.

This is an edited extract from Older & Bolder by Renata Singer (MUP, RRP $34.99, eBook $14.99), out now. Visit the MUP site