Women and Retirement: Backwards and in High Heels

Americans are so woefully unprepared for retirement that some policy makers are starting to take notice. When it comes to retirement planning, women are like Ginger Rogers paired with Fred Astaire: we have to do everything a man does to prepare, but backwards and in high heels. The consequence is that while full-time working white women in the United States earn only 78 cents for every dollar men earn, the income gap for women in retirement is far wider, with total income for women over age 65 at just 55 percent of older men’s income (Sen Patty Murray Report on The Gender Retirement Gap). Both genders need better retirement options, but women are punished financially for our personal propensity to care. Our frequently interrupted income stream leads to hardship financially in retirement years. We need to consider our looming retirement crisis as a human catastrophe and a women’s economic empowerment issue. Remember the mantra: Control our Money, Control our Destiny. Without reform and planning for our futures, we control neither.

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The Female Financial Paradox

You are on a commercial flight cruising at 36,000 feet when the cabin begins to lose pressure and oxygen masks mysteriously drop from the ceiling above. Your small child is next to you and your first thought is to place the mask over her face make sure she gets enough air. But as you gasp for breath yourself, the flight attendant’s voice reverberates: place the mask over your mouth first so that you have the capacity to help others in need.

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Control our Money, Control Our Destiny: Women’s March 2017

I attended the Women’s March in Washington DC over the weekend. It was exhilarating and gave half a million participants an inspiring feeling of “yes we can!” I am still on a high from the sense of power in numbers and community I felt on that day.  One of the speakers, Kierra Johnson, the Executive Director of URGE, pointed out in her speech that “If someone else controls your body, it is they and not you that control your destiny.” Amen. I only wish that the women’s march could have articulated a parallel message source : if you don’t control your money, you don’t control your destiny either.

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The Roth 401k and the Man Behind the Curtain

I learned from a young age that rules are generally put in place for the collective good. Even though they may restrict certain individuals, they benefit others and the net sum of this help and hindrance is an overall positive. For example, when I was a little girl, my parents would serve us our dinner so we each got a bit of whatever was on the menu and we waited until everyone was served before we could dig in. Not only did we feel like a team when we broke bread together, but this method ensured that we all got a share of food. Without such rules, my big brother would have had the strength and alacrity to gobble up choice offerings in bulk, leaving very little for the youngest among us. So this rule seemed fair and we didn’t question it.

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Are We Hopeless? Adios, 2016

2016 has been an annus horribilis for many of us idealists who are still trying to come to terms with a narcissistic President Elect Trump who lacks even a pretense of a moral compass. In a recent interview with Oprah Winfrey, First Lady Michelle Obama put it this way: “We are feeling what not having hope feels like…. We Feel the difference now…. Hope is necessary. It’s a necessary concept.”

I agree that hope is necessary and that if we do not find a collective voice imminently we could lose fundamental, economic rights that we take for granted. Many of these rights disproportionately impact women and it is incumbent upon feminist groups to recognize that basic economic rights a Trump administration could erode, like Social Security, Medicare, or a federal minimum wage, are women’s rights, as well as men’s rights, and that we must coordinate our voices into a primal scream to protect these rights. For example, take Social Security. Read More

A Good First Step, Mr. Trump: Recognizing the Value of Stay-at-Home Parents and Caregivers

When my children were young, I had the luxury of taking a couple of years out of the workforce to stay home with them. That’s right. Staying home with your own children is considered a luxury in America today. And while I cherished spending full days with them, I also had a sense that my nurturing was serving a bigger purpose. My three, young children thrived under the attention my husband and I were able to give them. I could pass down to them many of the traditions my parents had passed to me, including reading classic books to them over afternoon hot chocolate and gingerbread and teaching them how to bake. I could help them with their homework and review flashcards for their multiplication tables. I even had time to volunteer in their school classrooms. To this day, I feel grateful for those years and the fact that I was able to shape them into productive citizens who can give back generously to society. Selfishly, I want them and their generation to reach their full potential so they can adequately fund the social programs my generation depends on: Social Security and Medicare.

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So when I waded through President Elect Trump’s tax plan highlights this week, past the parts that called for the repeal of the estate tax which benefits only the top 0.2 percent of taxpayers and the reduction of tax rates for the ultra-rich, I came across a tax deduction that I found provocative in its acknowledgement of the value of stay-at-home parents. The Trump tax plan calls for a deduction that reduces a family’s adjusted gross income for child care expenses, available for up to four children under age 13. The deduction would be capped at the average cost of child care in the state for a child of that age. While our current tax code had deductions for certain child care credits, this child care deduction would apply to both third-party child care facilities and stay-at-home parents or unpaid relatives serving as caretakers. What makes the Trump proposal novel is that families can deduct the cost of childcare from their taxable income, whether the child goes to a daycare facility or is cared for in the home by a parent or other relative.

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Retirement Rules and the Short End of the Stick

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My client, Jessica, worked in retail for the month of January last year before she was diagnosed with stage 2 breast cancer. Jessica was a planner by nature and was trying to put her financial life back together after divorce. Her separation agreement entitled her to a fifth of her husband’s income as alimony payments for a handful of years until he was old enough to receive Social Security. Jessica had limited retirement savings and so decided to live off her alimony payments and save her modest retail income into her 401k plan so it could grow tax deferred for her senior years. She managed to save a total of $500 before her devastating diagnosis.
picture2 After surgery and several bouts of chemotherapy, Jessica is now in remission and has regained her strength. But IRS rules have discriminated against her and have left her paying far more in taxes than she would have had she not been stricken with cancer and had been able to continue working. Because Jessica worked for an employer that offered a retirement plan, she was disqualified from contributing to a tax deductible IRA (Individual Retirement Account) even though she worked for less than one month of the calendar year and contributed only $500 to a 401k plan. This is because her ex-husband, a highly paid executive who earned more than $400,000 per year, paid Jessica $80,000 in alimony payments and so Jessica’s income exceeded IRS IRA deduction limits. Had she not been eligible to contribute to an employer plan, she would have been able to contribute $6,500 to a tax deductible IRA.

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Who’s your Daddy? A Paternalistic IRS

Assume you’re recently married and getting ready to file your first joint tax return. One of you has to choose being the “Taxpayer” or “Primary Taxpayer”. The IRS does not label the other of you “Co-Taxpayer”, but “Spouse” or “Secondary Taxpayer”, unnecessary and hierarchical descriptors that date back to generations when women were not predominantly part of the workforce and did not generally pay income tax based on their own earnings history.

That’s okay, you think to yourself. This year my spouse can be “The Taxpayer” and next year we’ll switch and he can be “Spouse”. Not so fast. While theoretically possible, the IRS computer systems are not set up to handle switches from “Taxpayer” to “Spouse” or from “Secondary” to “Primary” Taxpayer.
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“No problem,” you shrug. “I can spot the silver lining here. If I am not “The Taxpayer”, but merely a “Spouse”, then surely I cannot be responsible for the tax liability related to my spouse’s earnings. Ignorance is bliss!” No such luck. If you file your tax return under the Married Filing Jointly status (MFJ), you are jointly and severally liable for tax on both your and your spouse’s income. The concept here is that if you are filing a joint return, you are both benefitting from your joint income, no matter which one of you earns it. So you are both liable.

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No Exit

Last night, we elected a flagrant misogynist to be the 45th president of the United States. White women voted for Donald Trump over Hillary Clinton by 53 to 43 percent. Trump also won among men generally. So far, the stock market has given a big shrug, signaling that business will carry on as usual.

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I am an optimist. My head tells me that there must be some good in this, some ability to create positive energy out of what feels like a kick to the gut. Maybe women can organize and stand up for our financial self-interest instead of relying on elected representatives to fight our fight.

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The Little Red Hen and Social Security

I value self-reliance. In fact, my favorite book as a young child was “The Little Red Hen,” with the chorus, “I’ll do it myself,” said the Little Red Hen. “And so she did”. In the story, the Little Red Hen asks for help from the other barnyard animals each step of the way in harvesting ingredients and ultimately baking a delicious loaf of bread. She receives no help from the other animals who are childlike in the way they stand by and watch her do her work, hopeful that they will receive the fruits of her labor.

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When my kids were small and I would prepare meals for them as they steadily watched and then would clean up afterwards as they busied themselves with suddenly urgent homework, I would think to myself, “I am the Little Red Hen!”, although I would inevitably share my freshly baked treats with my family, knowing that much of my reward was watching them enjoy. Indeed, I have always found the Little Red Hen’s work ethic, sense of purpose, and efficiency inspiring.

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