Midlife Changes For Women

Midlife doesn't need to bring crisis. Sometimes, it just brings change, in the form of reinvention.

For women, turning 40 often brings new contemplations on their life plans, and, often, dreams of change. The Early Show took a closer look at this trend in Friday's installment of "Reaching for More." Peggy Northrop, editor-in-chief of More magazine, visited the broadcast, along with Susan Stewart, president of Charter Financial Group.

More magazine devotes part of its April issue to the topic of midlife change. "This whole theme of reinvention is really what midlife seems to be all about. Women turn 40 and they seem to say, 'Well, the game plan that I made for myself in my 20s and 30s is kind of up now. I have run out of plans,'" said Northrop. "And so they want to make a whole set of new plans and often they aren't quite sure where to start. It can be a really exciting time in a woman's life. It also can be kind of confusing."

This is the time of life when women often reevaluate not only their careers, but their marriages. "The divorce rate among women over 40 is higher than in any other age group. Somebody called it the 17 and a half-year itch," said Northrop.

Travel is another area that middle-aged women tend to think about. "Trying something that's physically adventurous is all of a sudden something that women want to do, sometimes to their detriment." And then, of course, there's career. "Work is huge. All of a sudden they'll say, 'I've been working for my family. I've been working for status. I've been working at the profession I started in when I was in my 20s. Now I want to do something that's meaningful to me,'" said Northrop.

Another thing that starts happening at this stage of life is that many women start paying attention to their financial situations in a new way. "We see the same things in the financial area, of women taking control of their financial lives, sort of waking up at a point and saying, 'I'm over 40. I can see that retirement time approaching fast. And what do I need to do about it?'" said Stewart, who also commented on why women tend to wait too long to start focusing on finances. "We weren't taught — certainly our mothers didn't confront these issues of 401(k)s and annuities."

The guests offered some tips for women, who are just starting to take control of their finances. Begin with the obvious: Spend less and save more.

"We've been hearing this for decades," said Stewart. But "you need a sense of urgency, and usually at 40 you hit that sense of urgency. So forgo the $800 shoes if you want to be able to retire."

Also, educate yourself about finances. "Now is the time to start learning and read the financial press and find out. Women control household spending. So they really do have their hands on the pulse of what's going on in America," said Stewart. "A lot of women over 40 do have the money saved — but now it's that fear, 'How do I invest it wisely?' That's the more difficult equation."

Stewart says it's also wise to take your time investing. Get the lay of the land before taking the plunge.

She also addressed other questions about how women should handle their finances at this stage of life.

When should you consider hiring a financial planner — and how do you find one?

Answer: I am not a big fan of traditional financial planners who plan for a fixed or hourly fee and then place clients in mutual funds for a commission. Women need to recognize how important expenses are to net return and not be so blasé about that portion of their plan that deals with actual investing. I am a strident proponent of hiring fee-only financial advisors, be they financial planners or investment managers.

Financial Planning has to do with wealth creation and preservation. Regarding wealth creation, a good plan will help you do an analysis of income and spending with a goal to help you build investment assets. Financial planning also includes analysis of your estate and insurance needs. I think a financial planner can really help at this phase, if only to help organize thoughts and commit goals to paper. The key action steps for building savings and investment assets out of income are as follows:

1. Reduce spending and recognize that the short term-gratification comes at the expense of financial security and freedom.

2. Max out on 401(k) or other available retirement savings vehicles.

3. Get rid of debt.

Critical steps in managing investment assets are:

1. Do not presume you have to use investment products to allocate your investment dollars. At the heart of mutual funds are stocks and bonds. Buy directly.

2. Watch expenses like trading commissions and fees. Never buy a "load" mutual fund.

3. Where possible, consider building your own portfolio of stocks and bonds. You are as smart as any broker. There are nine sectors of the S&P 500. Pick three stocks (using your knowledge of products and services people like) in each sector, buy them in equal proportions and rebalance them every six months. You would be shocked at how well you can do.

4. Think for yourself.

5. If you decide you don't want to build your own portfolio, hire a professional to do it for you and choose one that must comply with the legal standard of acting in "your best interest". Registered investment advisers must adhere to that standard but brokers don't have to. Brokers only have to adhere to a standard of "suitability." Insist that the adviser tell you how they'll go about managing your portfolio, insist on paying them a management fee instead of commissions, thus aligning your financial interests with theirs, and insist on seeing their performance on similarly managed portfolios. How else would you judge the quality of their services?

6. Avoid an adviser that is just going to place you in managed mutual funds. You can do it yourself more efficiently using exchange-traded funds.

For a closer look at More magazine, click here.