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Retirement planning for widows

By Jennie L. Phipps · Bankrate.com
Wednesday, October 20, 2010
Posted: 3 pm ET

More than 80 percent of wives will outlive their husbands by an average of 14 years, according to calculations using U.S. Census data. Retirement plans for couples should take that reality into account.

Catherine Avery of Catherine Avery Investment Management, a New York City-based investment management company whose clients are primarily women, says she recommends that couples look at two strategies for extending their assets.

The first one is to spend less. The recommended amount of return that can be pulled annually from a retirement account while leaving the principal to grow is somewhere around 4 percent, ideally adjusted annually to reflect inflation. But in the current economic atmosphere, Avery says retirees will be much more secure over the long term if they annually evaluate their holdings and adjust the amount they spend based on the amount their principal has gained or lost. Avery says a retirement spending plan should have enough built-in give to make that kind of flexibility possible.

Second, she recommends investing between 20 percent and 80 percent of savings in dividend-paying stocks. Some people would say that is a too-aggressive strategy for anyone intent on preserving their capital. But Avery points out that even in the recent investment environment, solid dividend-paying stocks have returned both growth and income.

Ideally, she says, a retirement portfolio will invest in at least 20 to 35 different companies, so an investor's fate isn't tied to one firm. As a small example of the possibilities, Avery lists these companies and their five-year dividend growth rate:

  • Chevron, 10 percent
  • McDonald's, 34 percent
  • Johnson & Johnson, 10 percent
  • Emerson Electric, 12 percent
  • Coca-Cola, 10 percent

One of the beauties of this strategy, Avery says, is its simplicity -- you don't have to be an investment genius to understand how you're investing your money. Women who tend to be more risk-averse than men are happier with this kind of plan than they are putting their money in mutual funds that aren't usually very transparent, she says.

And yes, this is the same investment strategy that Grandma relied on. "It's a classic long-term style of investing. People got away from it, but now I believe they are going back because it really works," Avery says.

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2 Comments
A. Genji
October 26, 2010 at 1:33 pm

Investing in McDonalds is like a snake eating its tail: fast food is one of the biggest causes of the US obesity epidemic - which is going to bankrupt our health care "system" (or lack thereof).

In addition, in response to the growing costs of "health care" -- let us be clear that it is not the costs of an individual's health care that is growing - but (and health care "reform" didn't address this!) the costs of health care INSURANCE - and insurers related PROFITS. Furthermore, if you don't want your healthcare costs to increase beyond your means, don't become overweight or obese, don't eat very much (if any) red meat - esp. from animals that have been factory-farmed which meat is full of estrogen, a known carcinogen - and get plenty of exercise.

The problem with this "prescription" -- no one makes any $$$ off of it!!!!

J.Brown
October 23, 2010 at 10:48 am

The statistic that "More than 80 percent of wives will outlive their husbands by an average of 14 years, according to calculations using U.S. Census data" makes no sense. The life expectancies of males and females in the U.S. are not different by 14 years. I don't know the stats on married people life expectancies, but I doubt they differ from the general population by that many years. And I doubt that wives are, on the average, that much younger than their husbands.