Curtis: Yes, absolutely. I think women live about five years longer than men, on average now. That's the statistic I keep reading. And what I do is I'm very conservative in my assumptions about longevity. For example, I use 95 as the average age that people will live to. I use very conservative return assumptions in my plans, 5% to 6% throughout. I use 3% inflation rates, 4% for medical, 5% for any education costs.
And also I always, always include a long-term care expense at the end of life, where I add maybe $50,000 to $100,000 per year, and I inflate that at 4%, because most women will end up either going into a retirement community or needing some kind of care. So, on top of all their normal expenses, I make sure I have those conservative assumptions in there.
Benz: Can you explain that long-term care piece, Cathy, because it might not be intuitive why women would tend to have more of a need for paid long-term care?
Curtis: Yes, well, because women end up living longer than men, and in that five years is critical, at that point in life, and it's statistically true, most people will need some kind of long-term care help. Medicare doesn't cover it. They may need someone to come into their home, they may need to move to a retirement community or advanced care nursing home. And if you've ever visited a nursing home, you see that the majority of people in those places are women, right?
Eighty, ninety percent, even, are women, and it's expensive, and long-term care insurance is expensive. Most people can't afford the premiums. So, women definitely need to plan for that event in their life. It's probably going to happen.
Benz: You mentioned that you try to be conservative overall, Cathy, but speaking of conservative, fixed-income investment yields are really, really low today, so it seems like a prescription for many of us will be to hold more equities, but historically or when you look at some of the studies that have been done, women tend to take less equity risk in their portfolios. First of all, do you find that with your clients? And secondly, if you do, how do you counter that and get them to take an appropriate level of risk?
Curtis: Right. I hear that all the time that women are risk averse. However, women that hire advisors like me tend to let the advisor make the investment decisions. So, what I mean by that is, they hire me because they don't know what to do with their money, right? So we have the conversations about risk. I talk to them about it, I do a plan for them, and the plan really determines how much risk they need to take. What return do they need to have to reach their long-term goal? I also use things like risk-tolerance questionnaires. When that's all settled, I put them in an asset allocation that makes sense for their particular circumstance.
They trust me. That's why they hired me. They let me make the investment decisions, and we go from there. Now, there is a little bit of a problem with that, in that not all women make their way to a fiduciary advisor that's going to work in their best interest, right? They may find an advisor that isn't under a fiduciary standard and isn't really focused on the person's goals, and I think that's really unfortunate. And that's why the work of Morningstar, NAPFA, FPA, XYPN is so important in promoting advisors that do this fiduciary work for their clients.
Benz: Another thing that we hear about women, in addition to this risk-aversion thing that has been out there for a while, is that women tend to be more goal-oriented than their male counterparts. So, they're not really concerned with beating benchmarks. It's more like, can I achieve this goal of sending my kids to college, or paying for retirement, or whatever it might be. Do you find that your female clients are quite goal-oriented in this way?
Curtis: Absolutely. Once we get the investment policy statement in place and I go to work on that, all of my meetings with my female clients are focused on their goals. It's either their long-term goals or immediate financial issues that come up. Rarely does the word "benchmark" ever come up in our discussions, and it's really surprising. And I think, again, it goes back to that trust they've put in me to manage their money well and in their best interests.
Also, at least my female clients admittedly do not have the education to know about benchmarks and things like that, nor do they have the interest to delve in and learn about them, and they admit that. But they're smart, they're savvy. They know they need to be invested appropriately to reach their goals.
Benz: Last question for you, Cathy. We're in the midst of this pandemic, it's upended a lot of our lives, people are living and working differently and thinking, in some ways, big picture about their lives. Are you encountering that with your clients, that your clients are really revisiting assumptions, and maybe making large-scale changes at this point?
Curtis: Oh, yes. I'll just tell a really brief story. I have a woman, she's a widow, she's in her 70s, and last year she decided to sell her family home. She'd been there 40 years, raised her kids, moved to a nice retirement community, buy an apartment. I'd helped her with the financials and all that. Well, she's now getting closer to the date for move-in, and she is just really scared that she's not going to be able to have visitors. She's a very extroverted woman. She loves her friends. She loves her family.
Retirement communities are not letting visitors come, so she doesn't want to move in right now. She's less afraid about getting COVID than she is about not being able to see her friends and family. And I work with a lot of independent women, single women, and I'm finding the loneliness, and that is really the biggest concern. It's not so much about financials and things, it's more emotional.
In the financial picture, I'm finding that working women, many of them are seeing small pay cuts or their bonuses are being suspended. But at the same time, people aren't spending as much, right? There are not as many places to spend money, so it's kind of evening out for now, but my goal is to keep them on that lower spending budget after this is over.
Benz: A related question is, how wise is it to make really big decisions at this time, in what's a strange and what we hope will be an abbreviated time period that won't go on forever?
Curtis: Yes, that's true. I work at the San Francisco Bay area, a highly expensive place to live. Some of my younger women clients are getting ready to move out of their apartments. And, first off, they can work anywhere, at least for now, and they figure, why spend the money at the higher cost of living to live in the city. But you know what? Things could change. They may not be able to work at home in the future. So, I'm working through a lot of those kind of decisions right now. It's definitely a strange time.
Benz: Cathy, it's great to get your perspective. Thank you so much for being here.
