Retirement Advice For Women

Retirement is just around the corner for the first wave of baby boomers. But according to the AARP, a surprising 62 percent of the women in this country do not have long-term plans for their retirement.

Dawn Sweeney, president of AARP Services, visited The Early Show Thursday and said it's a trend that needs to change. "This is a fundamental challenge," she told co-anchor Rene Syler. "Just the disconnect between what women know, their instinctive knowing of 'I need to plan and I need to save,' and then their actual behavior is not always aligned. So the first critical key is to align our behavior. We know we need to save, we're just not doing it."

In many homes, men make the retirement planning decisions. But the AARP points out that women are living longer than men and that, in fact, one-third of women who are age 65 will live well into their 90s. Sweeney says that means women need to "prepare for maybe 10 or even 20 years where we're on our own."

Sweeney offered five key principles for retirement saving:

Lower fees
Always read the fine print on a prospectus so you'll know how much of your investment money is going toward fees. "We want our money to go to work for us," Sweeney said, rather than paying for fees for things we can actually create ourselves. "The difference in a high-fee product or even a moderate-fee product versus a low-fee product can mean hundreds of thousands of dollars that will be in our financial pockets for those extra years that we're living."

Index funds
These funds, which track indexes like the Standard & Poors 500, capture the drift of the market without the swings of an individual stock. Sweeney says they take some of the mystery out of investing, "so that we have a long-term strategy that will create success."

Diversification
"We all know that's important," said Sweeney. "And yet it's very hard as an individual to diversify your portfolio." She recommends finding a pre-diversified mutual fund, which removes much of the risk of investing.

Rebalancing
Rebalancing shifts the way money is allocated so you can capture your gains and control risk. "You set a target of your risk and what risk you're willing to assume and you want to make sure you stay at that target. If parts of the portfolio grow and parts of it contract your target goal can get misaligned. And so you want to make sure that your strategy is consistent with your investment philosophy and rebalancing creates that environment," Sweeney said.

Simple choices
"We need to know what we're buying. We need to understand in plain English what these investment opportunities are," Sweeney told Syler. "We don't need hundreds of choices. In fact hundreds of choices create indecision, create costly mistakes, create people just being paralyzed with fear of not knowing."

For a wealth of AARP resources to help with financial planning, click here.