By Gary North
In the United States, women outlive men by at least four years. In most cases, wives are several years younger than their husbands are. Combining these two statistical facts, we reach an inevitable conclusion: today’s wives are likely to spend more than half a decade as widows.
The reality of widowhood is that a woman will become dependent on somebody other than her husband unless she is fully in control of her faculties and her finances.
A woman who wants to remain independent in widowhood should understand from the day she gets married that she must learn the basics of family finances. The better she gets at handling money, and the better she gets at making money, the more likely she will retain her independence during the inevitable years of widowhood.
The problem is, people discount the future. They assume that the future will take care of itself, and that the future will be mostly positive. The trouble is, the older we get, the less likely that our future will be positive. The clock is ticking.
It is common in the United States for women to control the household budget. Couples should work together to establish spending and savings, although I don’t think this is as common as we like to believe. These days, programs like Quicken make it relatively easy to budget and to track a family’s spending patterns. It is easier than it was 20 years ago, and surely easier than it was 30 years ago. It is common for wives to handle the Quicken accounts. The question is this: Do wives have equal input on how the money comes in, and do they have equal input on what should be done for the long-term support of both of them in their retirement years?
We think that people act in their own self-interest, but we find that people prefer to defer. They prefer to kick the can down the road. They prefer to imitate Congress. The trouble is, the decision of Congress to kick the Medicare can down the road guarantees that the vast majority of women who are alive today will spend their final years as complete dependents on their children, and that they will probably be destitute.
There really is no escape from this statistically. We know the Medicare system is going to bankrupt the government, and therefore we know that the Medicare system will be modified so as to break the promises the politicians have made regarding the last years of our lives. There is no escape from this. It is going to hit every Western industrial nation. No one who looks at the numbers expects anything else.
Nevertheless, the vast majority of wives in the United States and the West do not begin to assert co-authority over the spending patterns of their households, despite the fact that they will be alone in their final years. They refuse to make decisions today that might give them a degree of protection in their old age.
One of the reasons why I favor the purchase of investment real estate is this: in people’s old age, the houses are owned free and clear, and the rental money is gravy. A person who owns half a dozen homes free and clear is going to make enough money to have a comfortable middle-class lifestyle in retirement. I realize that not everybody can own half a dozen homes, but everybody who subscribes to this website can.
One way or the other, wives are going to have to make decisions over where the money goes. They can begin to make these decisions in joint consultation with their husbands today, or they can wait until their husbands are dead.
Twenty-five years ago, Mark Skousen’s wife JoAnn published a newsletter for women. It focused on investing. The newsletter did not gain enough subscribers to stay in business, and so she ceased writing it. It was a very good newsletter. It was quite relevant. It didn’t matter, because she couldn’t get enough women to subscribe.
About that time, I interviewed Charlotte Foehner. She was the author of a very good book called The Widow’s Handbook. Her targeted audience was women like herself. Her husband had died unexpectedly, and she knew virtually nothing about investing. She had enormous responsibilities, and these responsibilities hit in a time when she was most psychologically vulnerable. Her husband was dead, and she had to put his affairs in order. He should have done this before he died. She should have insisted that he do it before he died. He didn’t, and she didn’t.
Answers can be painful. Answers increase the level of personal responsibility. Nobody can claim ignorance if someone has answered a major question. People think that they are better off by remaining in the dark, because they assume the problems are not going to hit them, and they might as well not think about it.
This is the attitude of the vast majority of Americans today. If they had any idea of what will happen to them, statistically speaking, more of them would start asking questions. But they don’t know, and even if they did, they would not like the answers. The answers would force them to restructure their lives. Answers would force them to restructure their dreams.
The fact that women become dependent on their husbands early in their marriages, because women have to take care of the family, gets them into a mentality of dependence. It is easy to become dependent upon the husband’s decisions. This has been the traditional approach throughout most of history. But with the vast increase in the division of labor over the last century, and with the increased life expectancy of women, this tradition is now a liability for women.
A woman has got to face statistical reality. She is going to be a widow in the final decade of her life. She is going to have to make her own decisions, and if she is incapable of doing this, either mentally or financially, somebody else is going to make her decisions for her. Traditionally, this has meant her oldest son and her daughter-in-law. She may trust her oldest son, but she has to face the reality of potential vetoes by her daughter-in-law.
A woman who is determined not to be dependent upon the judgment of her daughter-in-law should face reality early. She has got to have an independent stream of income, and she has got to have somebody other than her daughter-in-law making the decisions about how this stream of income is going to be allocated, and by whom.
Anyone who does not have an independent stream of income is inevitably going to be dependent. Any woman who does not want to be dependent upon another woman, especially a younger woman who resents the added expense of a mother-in-law, had better take great care in building a separate estate for herself in her old age.
Look at the median net worth of American families. Adjusted for inflation, it has not risen in 20 years. Most of this wealth was in the family’s home. That’s why it peaked in 2007.
This includes all age groups. Older people have more money. Whites at age 65 probably have about $225,000 in net worth. It was higher in 2007. Then the housing bubble popped.
http://www.agingstats.gov/agingstatsdotnet/Main_Site/Data/2010_Documents/Docs/OA_2010_Updates_123010.pdfThis is the measuring rod. Each family should assess its net worth.
How long will you last in retirement? In calculating this, add to expected expenses the replacement of Medicare, which on average pays $900 a month per household member. That was in 2009. It’s higher today; medical costs keep rising. Figure $1,000 per person per month. Two members means $2,000 a month. That is what it will cost to stay alive and healthy after age 65 when Medicare goes bust, which it will.
Who will be able to afford this? For how long?
If a person sells his home to pay for medical costs, where will he live? Add another $1,000 a month for rent. But medical costs will not decline.
Preparing for retirement is not easy. It involves asking questions. Any woman who does not ask questions is basically saying that she is content to live under the jurisdiction of her daughter-in-law in her old age. She had better have a financially secure daughter-in-law, and that daughter-in-law had better have her mother-in-law’s best interests at heart.
It is better to ask questions now than to be told what to do later.
Note: Gary North is one of the most brilliant men I know. He is a virtuoso in the field of economics and investing. Check out his website at http://www.garynorth.com/. Also, if you’re thinking of investing in real estate click HERE to read the criteria for my Turnkey Real Estate program.