One key way to improve your retirement prospects: Make it a point to save, invest and accumulate wealth as much as possible and to start early.

Although financial security in retirement for women have improved, new research from the Aegon Center for Longevity and Retirement report that women around the world share the same three career and financial challenges: a gender pay gap, time away from their careers, often due to caregiving responsibilities, and a lack of compensation for those responsibilities.

Despite the fact that women today are better educated and enjoy more career opportunities than any other time in history, even now, many struggle to achieve a financially secure retirement. As a result, it is imperative that women (and men) take greater control over their financial situation, retirement planning and long-term financial security. Women need to further engage in saving, investing, and preparing for long and healthy lives and secure retirements.

Aegon Center for Longevity and Retirement developed what they view as the “five fundamentals” for retirement readiness. The five fundamentals comprise: saving (starting early and saving habitually); planning (developing a retirement strategy); creating a backup plan for unforeseen events; upholding a healthy lifestyle; and embracing lifelong learning.

Overriding purpose of the key findings is to help men and women achieve a lifetime of financial security, both during their working years and through retirement. Important steps to take, according to Aegon’s report, include:

• Start saving, investing and accumulating wealth early and habitually. If offered a retirement plan at work, enroll in the plan. Admittedly, there are times in our lives when we can put away more money, and other times when it’s less. Yet, just the process of developing the habit of saving, investing and accumulating wealth can make a big difference.
• Develop a written financial strategy and plan. Create a plan that includes everything from goals you want to achieve to how you will reach those gaols. The plan should also factor in future healthcare expenses. It’s impossible to chart a course if you don’t have a destination in mind.
• Create a backup financial plan for unforeseen events. Consider emergency savings and insurance products such as disability insurance. Life will probably throw you some curve balls, so be ready to adjust your plans. Especially, if you plan to work longer and retire at an older age.
• Maintain a healthy habits and lifestyle. Make eating healthily, exercising regularly, avoiding stress and getting enough sleep part of their routine. Your health is key to enjoying your time in retirement. And yet, not enough people are paying attention now to their diet, exercise and sleep. By focusing on healthy habits now, you can keep health issues at bay later.
• Embrace lifelong learning and emotional wellness. Keeping your job skills up to date will help protect your income by keeping you employable. Keeping your social life active and engaged with friends and others will help create a more fulfilling life. And it’s also important not to neglect the basics of financial education and planning, and your social connections. You can make smart decisions with your money and smart choices with your emotional health.

Amid widespread concerns about the financial sustainability of social security and retirement systems, it is imperative that women (and men) take greater control over their financial security and retirement planning.

People need to engage in saving, investing, accumulating wealth and preparing for long, healthy and emotionally engaging lives and secure retirements.

References:

1. https://www.cnbc.com/2020/02/21/womens-retirement-prospects-are-improving-but-not-enough.html
2. https://www.aegon.com/research/

• Crude prices falling
• Coronavirus fears and near hysteria
• Bond market turmoil

Saudi Arabia’s decision over the weekend to instigate a crude oil price war as it escalates a clash with Russia sent oil prices down by the most since the Gulf War in January 1991 and caused the U.S. stock market to experience it single worst day sell off in nearly decade. Crude prices, along with U.S. government bond yields, are typically viewed as key barometers of economic health and confidence. Today, we may be witnessing the end of the longest running bull market in history.

The price war between major oil producers–Saudi Arabia and Russia–is riling global markets and economies at a time when economists and investors are struggling to understand how deeply the coronavirus outbreak will impact global supply chains and consumer spending. Coronavirus is an illness that has infected more than 100,000 worldwide — including more than 650 confirmed cases in the United States — and killed more than 3,000.

There is an assumption that when oil prices collapse, whether the collapse is driven by the demand side or supply side, the global economy is going to suffer. The latest tensions put the oil market in somewhat uncharted territory with pressure in terms of both supply and demand as the coronavirus epidemic threatens to sap businesses’ appetite for energy.

The plunge in crude added turmoil in equity and credit markets as investors have grown increasingly concerned about economic growth stalling. It also raised fresh concerns about the risks tied to heavily indebted energy companies in the high-yield market, and the fallout for other companies if broader credit markets tighten.

The service industry is getting hit the hardest and driving the economy into a recession as a result of the coronavirus. There is a destruction of demand in area of travel especially with the airlines and cruise lines, with entertainment such as restaurants and with sporting events.

Essentially, time like these of panic selling by the herd are not the time to sell stocks. Things are so uncertain regarding the coronavirus and even the experts appear uncertain on what will happen with the the virus. One day, uncertainty will wane and the markets will recover. You do not want to be the investor who locked in their losses at these levels.

https://www.bloomberg.com/news/articles/2020-03-08/yen-slides-as-oil-price-war-adds-to-global-worries-markets-wrap

Shifting investment strategies during or in anticipation of market movements is often counterproductive.

March 3, 2020

Featured, Roger Young, CFP®, Senior Financial Planner

Subscribe to T. Rowe Price Insights: Receive monthly retirement guidance, financial planning tips, and market updates straight to your inbox.

Highlights

• Reacting to where you think the market is headed may compromise long-term returns.
• Stocks respond to numerous forces, making timing the market a complicated and risky proposition.
• Keeping a long-term perspective can help you meet your investment goals.

Instead of staying focused on the fundamentals of a long-term strategy—including portfolio rebalancing and modest tactical adjustments—some investors let emotions drive their decisions. Doing so makes no more sense when times are good than when times are bad. “Attempting to time the market and avoid a downturn by making dramatic changes in your asset allocation can cause harm to your long-term investment results,” says Roger Young, CFP®, a senior financial planner with T. Rowe Price. “This is because you have to accurately make two decisions that are likely to trip you up: when to get out of stocks and when to get back in.”

Read more: https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/retirement-and-planning/personal-finance/case-for-staying-invested-through-volatile-markets.html.html

Key Takeaways

A typical emergency fund target covers three to six months of expenses 

Keep an emergency fund separate from long-term investments

Include emergency savings as part of your budgeting process

Save for emergencies.

To keep from dipping into long-term investments or borrowing at unattractive rates when you need cash in a hurry, create an emergency savings fund that can cover at least three months of essential living expenses such as rent or mortgage, utilities, food, and transportation.

An emergency fund isn’t just a repository of cash you can dip into when the tires wear out or the dishwasher breaks down. Those emergency dollars may actually be critical to your overall investing strategy. The general rule for emergency savings is three to six months’ worth of expenses.

It depends on personal lifestyle, career, and income. If income is a little more stable, maybe they can stick to something shorter. But if the situation is unstable or if they’re in a profession where maybe there’s risk of attrition, then they may want to have a longer type of fund set up.

the availability of emergency cash is the key short-term priority, because without it, longer-term goals could get dinged.

Financial experts advise to put financial goals into short-term, intermediate-term, and long-term buckets. The short-term budget would include emergency savings. Intermediate goals may include buying a house and paying for college. But, the Long-term goal is retirement. But intermediate and longer-term buckets can spring a leak if emergencies aren’t covered by short-term funds.

References:

“If you know the enemy and know yourself, you need not fear the result of a hundred battles.” Sun Tsu

In America, we have a spending problem. Inherently, we desire to drive the latest luxury vehicle, wear the most elegant fashions and go on the most extravagant vacations, whether or not we can afford them. On top of this, the entertainment media and lifestyle advertisers actively encourage the conspicuous spending and consumption which compounds the financial woes of American society.

Schwab Wealth Survey

According to a Charles Schwab 2019 Modern Wealth Survey, “more than a third of Americans admit their spending habits have been influenced by images and experiences shared by their friends on social media and confess they spend more than they can afford to avoid missing out on the fun.” The survey examined how a 1,000 Americans think about saving, spending, investing and wealth.

Survey respondents tended to place the blame on social media platforms and not people, “ranking social media as the biggest “bad” influence when it comes to how they manage their money, while they put friends and family at the top of “good” influences.”

According to the survey, “three in five Americans pay more attention to how their friends spend compared to how they save, with an equal number saying they’re at a loss to understand how their friends are able to afford the expensive vacations and trendy restaurant meals they portray on social media.”

Furthermore, the survey finds that “the pressure to spend as a result of social media envy and the desire to not be left out of friends’ experiences is particularly acute among Generation Z and millennials.

Financial Mindsets

These financial mindsets are derailing the financial lives and future on millions of Americans wanting to keep up.

“The keys to financial security and success are simple to achieve by every American.  The keys involve preparing a simple financial game plan, developing the correct financial mindset and implementing positive financial habits and behaviors…period.

“A ship without a rudder can certainly make its way across the water, but it has no control of where the water will take it–so grab your rudder and take initiative of your financial destiny.” Nancy LaPointe

Creating a game plan is a critical initial step in taking control of your financial future.  A simple financial plan allows you to get control of your financial future.

Financial Planning

“Everyday, you must believe and have faith in your ability to achieve financial security by following a few simple key financial concepts.”

Money is rarely about money. Money is all about your habits, your thoughts and your behaviors. Your habits, thoughts and behaviors about money determine your current and future financial destiny…how you spend, save, invest and accumulate wealth.

Financial mindset is a predetermined set of beliefs about money, spending, saving and investing. We all have them. Even if you can’t verbalize what your mindset, it’s still present both consciously and unconsciously. Some common money beliefs are ‘life’s all about what you own‘, ‘retirement is far away‘, and/or ‘my financial problems are _______’s fault‘.

It’s important to take time to identify what your financial mindset is. Because your financial mindset will either help you succeed financially or it will hold you back. And it’s not enough to just label old financial mindsets as false, you have to replace them with a new positive mindset.

Here are four common financial mindsets with the best replacement options:

1. Your life is about what spend and own vs Your life is about purpose, goals and priorities

Americans are consumers and driven by the “fear of missing out” and ‘keeping up with the Jones’. We’re easily caught up with what’s new, next, and just beyond our price range. But this cycle of constantly upgrading is hurting our financial life. Cutting your dependence on things is vital. Learning to live a life of purpose and setting financial goals and priorities that realizes it’s okay to own an older model vehicle and phone. Doing so will make your financial life a lot less complicated.

2. Saving money is for people who have extra vs Understand the importance of an emergency fund

Financial success boils down to spending less than you earn. It’s really simple. But people often spend every penny they make which doesn’t leave room for error in the future. Emergencies happen and this is how debt happens, so it’s important to tune your mindset to a saving mindset. Living below your means and saving a portion of your income not only lessens your dependence on your income but it also prevents you from going into debt in the future. Your first goal is $1,000. From there, work up to three months worth of expenses.

3. I can afford the payment vs I don’t want to incur debt repayments

Being able to afford the payment doesn’t mean you should afford the item. Making the phrase “I don’t want to incur debt repayments” an every day part of your life will prevent unplanned spending. It will also foster a mindset of spending less.

4. Someone/Something is to blame vs Accepting responsibility for financial life

You and only you are responsible for your financial life. All the decisions, big and little, you’ve made along the way are what have led you to your financial predicament. The less time you waste blaming others, the faster you’ll be able to move on to financial security.

References:

https://www.aboutschwab.com/modernwealth2019

Fear of the pandemic spread of the novel coronavirus in the U.S. and across the globe, and the panic selling of stocks has assumed a vice like grip on the U.S. equity markets over the past several trading days.  This is evident by the massive selloff of the markets over the past several trading days.

Take the S&P 500  benchmark, it has entered correction territory when measured by a ten percent decline from market high. Minutes prior to Friday’s market close, the S&P is down 14.3% from its all time high that it reached less than two weeks ago.

And the advice from financial advisors and pundits to remain calm and not sell–selling will only lock-in your paper losses into real losses–is apparently being ignored many retail investors. Basically, it appears that a majority of investors have succumbed to financial entertainment media’s hyper reporting of the news.

No one knows how long the panic selling will continue or when the downward trend will reverse. And, no one can safely predict the impact the novel Coronavirus will have on corporations’ quarterly earnings.

Couple this with Socialist Bernie Sanders recent success in the first three Democratic caucuses and primaries, this market correct may persist for awhile and may dip its toe into bear market territory before we see the current trend come to an end.

Needless to say, investors must remain calm and adhere to their long term investment plan. Fear and panic selling has never been a successful investing strategy. And, it should not be embraced today.

Instead remain calm and if you have cash available, take the opportunity to buy great companies while they’re on sale.

https://on.mktw.net/2PzwfGR

Financial literacy represents a significant area of financial wellness. Thus, the teaching of financial literacy must go beyond the basics of creating a budget and avoiding credit card debt. It must deliver real-world skills and knowledge about the challenges of debt and taxes, investing in the stock market, taking advantage of an employer’s 401(k) plans, managing credit and mortgages, accumulating wealth and many other financial topics.

Definition of Financial Literacy

The National Financial Educators Councils (NFEC) states, “A lot of people know what they should do; however a good majority freeze up when it comes time to make a financial decision. Most have the knowledge but lack the confidence to make the right decision and take action in a decisive manner. Since money is directly tied to peoples emotional state we feel including this component in our financial literacy definition is critical.”

Thus, we must take action now to combat this real world threat resulting the lack of financial literacy to Americans financial security. The National Financial Educators Council’s defines financial literacy definition as:

“Possessing the skills and knowledge on financial matters to confidently take effective action that best fulfills an individual’s personal, family and global community goals.”

Successful Investors are disciplined and patient, have developed good financial and investing habits, demonstrate positive financial Mindset and exhibit a belief in themselves.

Conversely, the principals of basic financial literacy and money management are not that complicated. The basic money management concepts are simple and once you have it down, you can apply the concepts for the rest of your life. Considering, the world that high school and college graduates will enter revolves around inherently money.

“The single biggest difference between financial success and financial failure is how well you manage your money. It’s simple: to master money, you must manage money.” T. Harv Eker, author Millionaire Mind

A 2009 Sports Illustrated report found that almost eight out of 10 former NFL football players suffer from financial stress within two years of their retirement. What’s more, the National Bureau of Economic Research estimates that one in six will file bankruptcy.

What is Financial Literacy

Basically, financial literacy is about effectively managing one’s money. It is an essential personal skill that will benefit individuals throughout their lives – and it is not skill that everybody learns.

With money, such as wages, coming in and expenses going out, with due dates, finance charges and fees attached to invoices and bills, and with the overall responsibility of making the right decisions about major purchases and investments consistently, managing money can be challenging for most Americans.

Americans would think that because the financial stakes are so high and the skills of managing money are so essential that this would be a skill that gets taught in high school or even college. Unfortunately, personal finance is not taught in educational institutions at any level in the United States. It is not taught in K-12 education, undergraduate or even post graduate levels unless an individual is majoring in finance.

Financial literacy and managing money require a fundamental understanding of personal cash flow, net worth, debt, inflation, the purchasing power of money, and a willingness to embrace personal responsibility. That means paying bills in a timely manner, saving for emergencies and retirement, and avoiding excessive debt.

It is important that individuals accept the fact that sometimes they have to sacrifice immediate demands and gratification for long-term financial security.

Americans Falling Behind

According to Money magazine, nearly half of American workers have saved less than fifty grand ($50K) for retirement, and fifteen percent (15%) had not saved a single cent. This means that for many Americans, their senior years will not be so golden and a majority of those will struggle financially due to their lack of financial literacy.

In the 2018 National Financial Capability Study (NFCS), almost half (46%) of survey respondents have not set aside in an emergency or ‘rainy day’ fund sufficient to cover expenses for three months in case of sickness, job loss, economic downturn, or other emergency according to FINRA Investor Education Foundation

More than half of millennials (about 54 percent) say debt is their “biggest financial concern.” according to a recent Wells Fargo Study.

“A compelling body of evidence demonstrates a strong association between financial literacy and household well-being. Survey after survey shows that households that demonstrate low levels of financial literacy are those that tend not to plan for retirement, borrow at high interest rates, and acquire fewer assets.” Shawn Cole

Taking Responsibility

A majority of Americans appear to have not taken responsibility for their financial security during their working lifetimes, after retirement or have done much retirement planning before retirement.

Forty-one percent of respondents have tried to figure out how much they need, their number, to save for retirement, while 54% have not. The act of planning for retirement remains a ‘strong positive indicator’ of retirement wealth, according to FINRA.

According to Dave Ramsey, the goal behind teaching financial literacy is to help people develop a stronger understanding of basic financial concepts—that way, they can handle their money better.

Ramsey considers financial literacy a worthy goal, especially when you consider a few stats about how the typical American handles money:

• Nearly four out of every five U.S. workers live paycheck to paycheck.
• Over a quarter never save any money from month to month.
• Almost 75% are in some form of debt, and most assume they always will be.(1)

Additionally, there’s a $6.6 trillion gap between the pensions and retirement savings of U.S. households and what they should have to maintain their living standards in retirement – and the gap is growing. Retirement Income Deficit report by Retirement USA tells us that:

• 41% of baby boomers expect their standard of living to decrease in retirement. Transamerica Center for Retirement Studies.
• Only 14% of baby boomers have a written retirement strategy. Transamerica Center for Retirement Studies.
• 83% said that personal financial challenges had a large impact or some impact on overall employee performance. Society for Human Resource Management
• 46% of Americans have less than $10,000 saved for retirement. Employment Benefit Research Institute
• Student load debt exceeds $1.1 Trillion. Fastweb and FinAid

“The number one problem in today’s generation and economy is the lack of financial literacy.” Alan Greenspan, Former Chairman, Federal Reserve

Financial Literacy must become a priority in our high school classrooms and college campuses across our great country. Too many Americans are being left behind financially due their inability to effectively manage their money and control their personal finances.

Over the past decade, the U.S. economy has witness the longest period of economic expansion in it history. Yet, a majority of Americans failed to participate in the expansion as measured by the widening income, wealth and retirement gaps evident in the country.

And, you can conclude that the lack of financial literacy is a major reason behind the gap.

Sources:

1. https://www.usfinancialcapability.org/downloads/NFCS_2018_Report_Natl_Findings.pdf
2. http://www.retirement-usa.org
3. https://www.daveramsey.com/blog/what-is-financial-literacy