Dollars And Sense

Jean Chatzky wants women to feel more confident about managing their money.

By the year 2030, two-thirds of wealth in the United States will end up in the hands of women, says the New York Times best-selling author, financial editor of “Today,” and CEO and host of the HerMoney podcast. And she wants them to be prepared.

As part of the launch of her new book, “Women with Money: The Judgment-Free Guide to Creating the Joyful, Less Stressed, Purposeful (and Yes, Rich) Life You Deserve,” Chatzky held a series of “Happy Hour” conversations with women of all ages, backgrounds and career stages to discuss personal finance. (As she says, when money is the topic, wine always helps.)

“Women would rather talk about almost anything other than their finances,” says Chatzky, who lives in Westchester County, New York, and turns 54 this month. “I met with women who don’t typically have conversations about money to meet in a supportive environment and talk freely about money. It was amazing to see how comfortable they became discussing their finances, asking questions and learning that other women share many of their same challenges.”

We sat down with Chatzky to pick her brain about all things personal finance – from retirement funds and debt to health care costs and more.

For people who may be worried about not having enough money for retirement, what do you suggest? 

They may need to consider downsizing their home or relocating to an area with a lower cost of living. If you can afford to wait, starting Social Security later than age 62 can pay off. For every year you delay starting to collect Social Security up to the age of 70, your benefits will grow by approximately 8 percent. In addition, people over age 50 have higher annual retirement- contribution limits thanks to what the IRS calls “catch-up contributions.” Another option is investing in a target-date retirement fund that selects an appropriate mix of investments based on your age and retirement date.

What advice do you have for parents who want to help college-age kids without going into debt themselves?

It’s important for parents to strike a balance when it comes to helping their children pay for college while not sacrificing money for their own retirement. There’s no financial aid for retirement, but there’s plenty for college. Regardless of a family’s financial standing, I recommend filling out the Free Application for Federal Student Aid (FAFSA) and to also see if your child is eligible for scholarships and Pell Grants. 

It’s important to look at college as a value proposition and consider state schools versus private schools. Weigh the financial pros and cons of each school, and minimize borrowing. Talk to your teen early if you need them to take on a share of their college costs, and discuss ways they can help by taking on a part-time job. 

If you don’t already have a 529 college savings plan, consider opening one. The sooner you start to save, the more you’ll accumulate. With a 529 plan, qualified contributions can grow tax-free, and withdrawals are tax-free if they’re used for higher education expenses. 

What are some of the most common financial questions or concerns you hear from women?

Despite having more money and power than at any other time in history, women continue to be far less confident than men when it comes to their finances.

Women have an innate need for financial security, safety and stability. They tend to keep a lot of money in the bank but aren’t confident when it comes to investing. I recommend keeping an emergency fund in a savings account – but not much else. You need to invest in the markets and have your money working for you in order to produce income and stay ahead of taxes and inflation.

First, I recommend women set aside 15 percent of what they earn and put that money to work in an index fund. Second, I encourage women who think they need help with investing to meet with a financial advisor who can address their individual concerns.

What’s the most common money fear for women?

One of the biggest fears I hear from women is the possibility of running out of money in retirement. To determine what your savings target should be for retirement, consider using the Retirement Nestegg Calculator on my website, where you can input specifics about your income. It will give you a good idea of your savings target and the amount you need to save in order to maintain your current standard of living.

Once you know what you’ll need for your retirement, you can start to look at ways to boost your retirement income, whether that means delaying your retirement or increasing your contributions to your workplace or personal retirement plan. 

How can people ensure they have enough money to pay for rising health care costs and out-of-pocket medical expenses?

My book “AgeProof: Living Longer Without Running Out of Money or Breaking a Hip,” written in 2017 with Dr. Michael Roizen, offers advice on both staying healthy and financially secure as you age. In writing the book, I learned that chronic diseases account for 75 percent of the money our nation spends on health care. Yet many of these diseases – including heart disease, stroke, cancer and diabetes – are often preventable and frequently manageable through early detection, improved diet and exercise. 

Make it a priority to do things such as reducing toxins and stress. These steps can improve your health, lower your risk of developing a chronic disease and reduce your health care premiums and prescriptions as you age.

In retirement, your health costs will most likely go up, and one way consumers can save is to contribute pre-tax dollars to a flexible spending account (FSA) or health savings account (HSA). Because these dollars are invested tax-free and aren’t taxed when used for medical expenses, they stretch your dollar further and can be used for medical bills or prescriptions.

You talk about tracking spending. What does this process tell individuals about their finances?

I have a chapter in my book entitled, The Joy of Spending, where I encourage readers to look at where they’re putting their money and whether or not their expenses are giving them joy or regret. It often surprises people to see where their money is actually going. Tracking your spending allows people to make financial adjustments and identify areas where they spend on things that are important to them and also cut back on the things that aren’t.

What are the main messages you hope readers take away from your new book?

Step up, and learn how to invest your money. Investing in the stock market is a great way to build wealth and fund your long-term goals. If you have a 401(k) retirement plan, you’re already investing. And, if you don’t have one, you can set up a Roth IRA or a traditional individual retirement account. If your employer has a matching 401(k), take advantage of that by contributing enough that you get the full match.

Explore your relationship with money. How were you raised with money? If your parents fought about being in debt, that might explain why you feel anxious discussing finances. I encourage people to explore their own “money story,” which is the emotional relationship they have with money and how they earn, invest and spend it. O