The Feminine Money Mystique

The secret's out: women can create and manage lasting wealth

you’ve clicked, read and researched your way to a plan, it’s time to put it into action. This is where you’ll have to adopt an aggressive approach, because the biggest problem that many women face in retirement is not having saved enough.

In fact, African American investors, and particularly black women, tend to subscribe to what Michael DeFlorimonte, who heads Schwab’s African American Marketing Initiative, terms a “culture of conservatism”: 44% of blacks in the Ariel-Schwab survey keep most of their assets in bank accounts. According to Stephens, it’s a mistrust of Wall Street that leads many African American women to put their money in these low-interest, federally insured accounts.
The solution? “Begin [investing] at least 10% to 15% of your monthly income,” says Broussard. “Pay yourself first is the answer. Have the money automatically deducted from your paycheck to make it pain-free.”

A good place to start is with your company’s 401(k) plan. Hackney is “aggressively maxing it out” as one of the main components of her retirement portfolio. For 2000, you can contribute up to $10,500 in pretax dollars, so take advantage of it.

If you don’t have a 401(k) at work, then consider opening an IRA (individual retirement account). The annual contribution is limited to only $2,000, but at least it’s pretax, so you get a deduction for it on your tax return. Or you may opt for a Roth IRA, which offers no tax deduction but your money isn’t taxed when you withdraw the funds (see “When Your 401(k) Isn’t Enough” in this issue).

Outside of these structured plans, you can get the investment ball rolling for as little as $25 a month, which can be automatically deducted from your checking account. Sounds like peanuts? According to Oppenheimer, if you began with an initial investment of $1,000 and a fixed rate of return of 8%, after 30 years, with monthly $25 contributions, the $1,000 would grow to a hefty $45,276; without additional funds, the $1,000 would grow to $10,063.

In fact, you can invest in most Oppenheimer funds for only $25 a month after getting in with a $1,000 minimum initial investment. The Capital Income fund, for example, sports a solid 15.02% five-year average annualized return.

TIAA-CREF, the mega pension and annuity company, will let you into one of its six funds for $25 a month (as long as you sign up for an Automatic Investment plan; without it, the minimum initial invest is $250). The Growth Equity Fund (TIGEX) has returned 32.5% over the last year, while its benchmark, the S&P 500, has only returned 22.8%, according to Chicago-based fund tracker Morningstar. Major fund provider T. Rowe Price will also let you in to any fund in its family if you commit to a $50 automatic withdrawal from your bank account. However you have to do it, just “get started with a couple of mutual funds,” says Stephens. “Whether it’s growth, international or conservative blue-chip.” Stephens’ top fund-family picks are Janus, Strong, American Century and Fremont.

Two other means of low-cost entry

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