Your Badass Future Starts Today | MAKERS Money
Dream of retiring with a cocktail in one hand and a lot of cash in the other? Sallie Krawcheck, CEO and Co-Founder of Ellevest, delivers tips that can help you achieve those goals. Special guest appearance by Tanya Van Court of Goalsetter, an online savings platform. MAKERS Money is produced by MAKERS and Yahoo Finance in partnership with Ellevest.
SALLIE KRAWCHECK: Money is power. And ladies, it's time to level the playing field.
Hi, everyone. Welcome to "MAKERS Money." I'm Sallie Krawcheck, CEO of Ellevest, the investing platform for women.
Are you ready for a shocking number? The US has record retirement savings shortfall of $13 trillion. Not million, not billion-- trillion. And newsflash, ladies, this is a woman's crisis. That's because we live longer than men, and we retire with less money than they do. The good news? We can fix this for ourselves and live the badass lives we were meant to live.
So how much of the green stuff do you need to have when you retire? Your goal should be to save 8 to 10 times your annual salary. I know. I can hear you. I can hear you hyperventilating out there. But that's what you need if you want to spend 90% of your pre-retirement levels annually.
It's a bit more than you hear at the majority of investing firms, but we want you to retire like a boss-- more travel, more fun. And since we women live longer on average, it's better to have a bigger cushion. Yes, in this case, bigger is better.
There are two big steps you can take to increase the likelihood of having more money in retirement. The first is to invest intelligently. And that means a diversified investment portfolio that you steadily add to over time.
But Sallie, what if I prefer saving because it's safe, and investing just seems so risky and complicated. OK. But here's the problem. If you're saving 10% of your income for retirement annually and keeping it in cash, your chances of retiring like a badass is zero. It's 0%. So when it comes to planning for your financial future, playing it too safe is just about the most dangerous thing you can do.
The second step is one that few people talk about, which is to make sure you're getting paid what you're worth at work. Now, this is huge. It's huge, ladies, since on average we're paid 80% of what the guys, make 63% for women of color.
Now, I personally hated asking for a raise. After all, it's an awkward conversation, and it always caused my neck to break out in these big blotches. Well, what if I told you your gender pay gap is costing you hundreds of thousands of dollars over the course of your career? Fixing that-- fixing that is worth some neck splotching. Buy a turtleneck.
This week, I'm delighted to be joined by Tanya Van Court, founder and CEO of Goalsetter, an online saving and gifting platform to help kids save for their dreams. Welcome, Tanya, and cheers.
TANYA VAN COURT: Thank you. Cheers, Sallie.
SALLIE KRAWCHECK: Cheers, a little happy hour.
TANYA VAN COURT: Thank you for having me.
SALLIE KRAWCHECK: Glad to have you here. Now, we're talking about raises. You've worked at Nickelodeon. You've got your startup. You've asked for raises, and you've given raises. What's your advice for all of us?
TANYA VAN COURT: The thing about raises is that there is a set pool that is put aside for raises to all employees. So if you're an average employee, the likelihood is that you will get an average raise. If you want a big raise, a real raise, on an annual basis, you have to be exemplary. You have to be indispensable.
SALLIE KRAWCHECK: What I found when I used to be in a position to give raises is that the guys were always telling me how much they wanted to make, and the women never would. And even though I would try my hardest not to let that impact how much I paid them, if you knew someone wanted to make this, it was really hard to pay them that.
TANYA VAN COURT: So women need to have those conversations, to your great point, about how much they want to make. But not only how much they want to make-- what the clear expectations are that will get them to that point of being deemed successful.
SALLIE KRAWCHECK: I completely agree. Now, you left Nickelodeon. You've started this amazing new business. How has that changed how you're saving for and investing for retirement?
TANYA VAN COURT: Well, you know, when you're working at a really big company, you typically have a 401(k), and so it's really easy to say I'm going to set aside this amount every paycheck towards my retirement fund, and my employer will match that or contribute something towards my retirement fund as well. When you're working for yourself, you don't have the benefit of a retirement fund early on. So what I think about now is that every extra dollar that I have needs to go to my retirement.
SALLIE KRAWCHECK: OK. Now, I have a question to embarrass you a little bit, and let you brag a little bit. What is the dumbest thing you've ever done with money, and what's the smartest thing you ever did with your money?
TANYA VAN COURT: So the dumbest thing that I've ever done with my money caused me to start this company, quite frankly. I had more than a million dollars in stock. And in 2001, when the big Silicon Valley bubble burst, that more than a million dollars became not much more than $100 in a matter of a day. And that was because I hadn't diversified my money. I didn't know what diversification was.
SALLIE KRAWCHECK: It can be devastating.
TANYA VAN COURT: That's exactly right.
SALLIE KRAWCHECK: What's the smartest thing you've done with your money?
TANYA VAN COURT: The smartest thing I've ever done with my money is changed financial advisors and found someone who I was really comfortable with.
SALLIE KRAWCHECK: Right.
TANYA VAN COURT: Money can be such a scary topic for people to talk about. And we don't want to-- particularly, I think, as women-- ask stupid questions about our money. That's why I so love what you're doing at Ellevest, because you give all of the women out there that safe space to talk about money in a way that doesn't feel judgmental.
SALLIE KRAWCHECK: I love to hear that. Thank you so much for being here with us.
TANYA VAN COURT: Absolutely.
SALLIE KRAWCHECK: What a pleasure to have you. Thank you.
TANYA VAN COURT: Thank you. Thank you for having me.
SALLIE KRAWCHECK: Now, I want to get to some great questions from all of you. So the first one in this week-- Sallie, I'm at my first corporate job and I'm wondering what I should do with my money. Should I be in the 401(k) plan that has a 25% match on the first 5% of my salary? Or should I invest in stocks and bonds on my own?
OK. First of all, no on the stocks and bonds on your own. It is tough for even professionals to pick the right stocks and bonds. For you as an individual trying to do in your spare time, forget it. Just forget it. A 401(k) plan at work should typically provide you with the opportunity to invest in target date funds or mutual funds, which will manage the investments for you.
Second, you do not want to miss out on the opportunity on that 401(k) match. That's because a 401(k) match is free money-- free money. You don't have to work any harder to get it. You just need to contribute to your 401(k). So bottom line, if you can get a 25% company match, you want to do that every single time.
Second question asked-- what's a Roth IRA, and should I be investing in one? An IRA stands for Individual Retirement Account, and anyone who earns money can have one. You may hear about a traditional IRA or a Roth IRA. The Roth IRA, contributions are made with money after you've paid your income taxes. And then when you withdraw the money later, after it grows tax-deferred, you don't owe any more taxes. So generally speaking, that's a good thing.
Here's the bottom line. The cost of waiting to invest is higher than you think. If you're making, let's say, $85,000 a year, putting 20% in the bank, and waiting to invest, and waiting, and waiting, as so many women do, and you wait 10 years. Do you know how much that costs you, on average historically, a day? $100. $100 a day by not investing-- I like to say, if that money was falling out of your pocketbook, you wouldn't wait many days to fix your pocketbook.
Want to be equal with men? Well, we're not getting there until we are financially equal with men. And they're investing, and we're not. Boom.
Thanks to Tanya for joining us. Ladies, we want to hear from you. So tweet to us at @makerswomen, and use the hashtag #makersmoney. Or send your questions to me at makers.com. Until next time, remember-- more money, more power.