Sangita Joshi, a Financial Planner with Prudential Financial, organized a seminar on “Financial Choices that Matter Most” for women on May 14, 2005 at Best Western in Cambridge, MA. The seminar was coordinated by the Boston Indus Women Leaders (IWL).  IWL’s mission is to further develop proven South Asian women leaders by providing resources to achieve their life goals through advocacy, mentorship, networking, education, and goal setting tools. The events are targeted to South Asian women who are a minimum of 28 years old, with a minimum of 5 years work experience, and dedicated to effecting positive change in their communities, workplace, and lives.

Afsana Akhtar gave the opening remarks. “Women earn 76 cents to a dollar of what men earn and live longer. As such, it is especially important for women to do financially planning for the future,” said Akhtar. Sangeeta Raju then introduced the speaker.

Sangita received her undergraduate degree from Boston University and her MBA from Babson. She has been with Prudential Financial for the past 7 years and takes a wholistic view when she deals with her clients. “Life has many financial choices such as family, home, education, caring for parent, retirement, coping alone, etc. As such, one faces many choices in protecting ones income and assets,” said Sangita.

At the core of financial planning, lies the Tax Control Triangle, which consists of (a) after tax options such as tax exempt bonds/funds, education saving accounts, life insurance, Roth IRA, (b) after tax options such as real estate, mutual funds, annuities, CDs, money market accounts, and (c) before tax options such as qualified plans, 401(k), TSA and IRA/SEP. Most people concentrate on before tax options. However, according to Sangita, “It is important to diversify and have money in various before and after tax accounts as no one knows what the tax rates will be when one is ready to withdrawn money in the future. Even though the tax rate today is around 30%, it has been as high as 50-70% in the past.”

Equity assets can be classified into broad disciplines such as growth or value investing. The Strategic Investment Research Group has broken down these broad disciplines into ‘substyles’ such as deep value, traditional value, relative value, momentum growth, core, traditional growth and  growth at a reasonable price (GARP).  It is important not to chase last year’s winners as no substyle of investing has had two winning years in a row since 1994.

In an overview of various terminologies, Sangita talked about college education, retirement, workers compensation, short and long term disabilities, automobile insurance for bodily injury to others, term and permanent life insurance, long term care, and health care proxy.

One should allocate their assets based on their risk score. The risk score is a function of your age, how long you plan to invest your money before you begin to make withdrawals, your expected financial situation in the next five years, your short-term and long-term expectations for returns and tolerance for short-term losses. A person with a high risk score might typically invest 100% in stocks. On the other hand, a person with low risk score might choose to invest about 60% in bonds and 40% in stocks.

According to Sangita, two questions that most people have are how much money will it cost to send the kids to college and how much do I need to save for retirement. Assuming that is costs about $60K and $130K to send a child to a public and private college today, and assuming a 6% compound inflation, the expected cost will be about $110K and $236K, respectively, in 10 years. How much do you need to accumulate for retirement? The following data should help one plan for retirement (assuming 6% average rate of return and not accounting for inflation).

Pre-retirement income                                                $100K
Retirement income at 70%                                        $70K
Savings needed to fund 20 years in retirement     $852K
Savings needed to fund 25 years in retirement     $948K
Savings needed to fund 30 years in retirement     $1,021K

A very informative session!

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