Invest now in your financial future

By Mary Ann Hellinghausen
August 18, 1997

Charting your finances

But because she puts the maximum allowed in her tax-deferred 401(k) retirement plan and is investing aggressively, Farquharson is probably well ahead of most of her peers in the healthcare industry, many of whom give little thought to their retirement years until it’s too late.

"There’s a tendency for nurses to retire poorer because of a lack of focus on retirement issues," said Charles King, a compensation consultant with William M. Mercer Inc., a human resources management consulting firm. "Ask any group of nurses how many contributed $2,000 to an IRA [individual retirement account] this year, and there won’t be many. It’s a very important thing to do, and if you say you don’t have the money, well, you’ve got to manage to have the money," said King, who used to work in the healthcare industry.

The first step to a comfortable retirement is to start putting money aside now, ideally from the first day you enter the work force, financial experts say.

"I always ask people if they realize that the Olympics here in Los Angeles was 13 years ago," said David Richman, account executive with Dean Witter Reynolds Inc., a mutual fund provider. "Time goes by in a flash. If you had invested $100 a month for 13 years with a 12-percent return, you would have accumulated $37,000. It’s time in the market, not timing."

So where do you begin?

First, find out from your employer’s human resources department what kind of retirement plan your facility offers. Second, begin participating. Many employers today offer 401(k) plans, which allow employees to set aside a portion of their salary into a tax-deferred retirement plan. Employers often contribute to the plan by matching the employee’s portion.

In the case of a nonprofit employer, tax sheltered annuity (TSA) or 403 B plans are sometimes available, marketed by insurance companies to individual employees. Larger employers often will contribute to the employee’s TSA plan.

"Healthcare providers are a little less likely [than corporations] to provide retirement benefits, in which case you have to be sure you’re saving for yourself," said Martha Priddy Patterson, director of employee benefits policy and analysis for KPMG Peat Marwick’s compensation and benefits consulting practice.

Again, an IRA is a must if your employer does not have a retirement plan. But the annual $2,000 tax-deferred maximum allowed to be deposited in an IRA won’t be enough, so financial planners advise investing a set amount each month in mutual funds, stocks, or bonds. "Find some way to have savings taken out of your paycheck so you won’t see it," Patterson said. "If you don’t get that money in your hot little hand, you won’t spend it."

"Pay yourself first, and pray when you get to the end of the checkbook you have enough left for food," said Sydney Morgan, a financial consultant at Merrill Lynch, a securities firm. "Money is like oxygen—it’s really not important until you don’t have any."

For help in assessing your finances, many mutual fund providers offer free software or professional advice. Investment clubs also can be helpful, although professionals warn not to fall victim to a "herd mentality"; financial decisions should be based on each individual’s goals and circumstances.

Women, who make up 95 percent of the nursing profession, have historically tended to shy away from aggressive investing, parking their savings instead in low-risk, low-yield accounts. "If your money is earning 4 percent, you’ll be eating cat food when you retire," Morgan said.

The younger you are, the more risk you should take with your money, experts agree. A good rule of thumb to determine the percentage of assets you should have in stocks or mutual funds is to subtract your age from 100. Thus, people in their 30s should have about 70 percent of their assets in the stock market.

Women, especially nurses, tend to change jobs more often and interrupt their careers to care for children or parents, which can threaten the build up of retirement benefits. Women, who can expect to live 19 years in retirement—four years longer than men—often outlive their resources.

In her book, The Working Woman’s Guide to Retirement Planning, published by Prentice Hall, Patterson illustrates how devastating job changes can be when an employee leaves a job before being vested in a retirement plan. The money an employee puts into a retirement fund is always his or hers to keep; however, the employer’s matching contribution may be lost.

Patterson’s offers the example of a nurse who worked for six employers during a 39-year career. If the 60-year-old nurse, who now earns $36,750 a year, retires at 65, she will receive an annual pension of less than $4,650—a third less than if she had stayed with one employer over her career.

Patterson writes, "Over the years as she left her various jobs, she left behind valuable retirement benefits because she had not stayed with her employer long enough to vest in the benefits and did not have the right to take them with her or receive payments when she did eventually retire."

Pay attention to vesting schedules, and if a new job means losing benefits from the old employer, negotiate a bonus from the new employer to compensate for lost benefits—and invest the bonus, Patterson advised.

Nurses also should consider the physical demands of the profession, which could force early retirement. "There’s an effective energy level that’s required, and sometimes you can’t maintain that pace," King said. "If you need to retire when you’re 55, make sure you’ll build a financial plan to help you do that."