A Critical Need for Women: Financial and Estate Planning

May 11, 2017 1:00 pm

Some healthy reminders

Key Takeaways

Women over 65 are more than twice as likely as men of the same age to be unmarried.

Divorce can be as emotionally devastating as the death of a partner and is often a source of financial hardship—the rate of divorce in middle age is rising.

Although state laws largely determine property settlements, women should obtain advice from professionals who fully understand all available options for securing their support, including Social Security and pension benefit entitlements.

When it comes to financial and estate planning, women face a unique set of challenges. Statistically, a married woman is likely to outlive her husband. According to the U.S. Census Bureau, the average age of an American widow is 59 years old and women turning 65 today can expect to live on average to age 86. That’s a long time to be on one’s own. Other women who never married or who are divorced are facing retirement as single individuals. In fact, women who are age 65 or older are more than twice as likely as men of the same age to be unmarried.

Whether married, widowed, divorced or single, women have something in common—the need to develop their own financial savvy in order to maintain their independence as they age. That’s where you and your financial advisor (regardless of gender) can be a big help.

Imagine the overwhelming anxiety that accompanies managing household finances for the first time after a spouse has passed away or after a divorce. A woman who is familiar with her finances will find it much easier to assume additional financial responsibilities should the need arise.

As a start, women should know the location of pertinent financial paperwork, including insurance policies, real estate deeds, mortgages, stock certificates, bonds, and brokerage account and annuity statements. Women should also take the steps necessary to understand the aforementioned documents even if their spouses did not understand them fully.

While the situation is improving, single women as well as women in dual-income households often have lower lifetime earnings than the men in their lives. This earnings gap adversely affects the amount of Social Security and pension benefits a woman often receives upon retirement. Retirement benefits are often further reduced by the time women typically take off throughout their childbearing and child-rearing years.

Closing income gap challenges

In addition to having fewer resources due to pay inequity or time out of the workforce, the average widow’s compensation from Social Security in 2016 was only $1,285 per month. Therefore, women should take full advantage of any company-sponsored retirement plans whenever available, and if they are not available, IRAs and other options must be considered and implemented. The goal is to start this planning as early in life as possible, but even older women can make contributions that will pay off when they need income later in life.

Similarly, divorce can be as emotionally trying as the death of a partner and is often a source of financial hardship as well. The number of divorces in middle age has risen in recent years. Many older divorced women had long marriages before separating from their spouses. Many are displaced homemakers who have not participated in the workforce or who have not continued their education since before having children. During a divorce, women must protect their financial security. Although state laws largely determine property settlements, women should obtain advice from professionals who fully understand all the available options for securing their support, including Social Security and pension benefit entitlements.

Estate plan starters

Another critical step to maintaining independence is establishing or updating an estate plan. The act of drafting a will forces a woman to review her financial situation, which enhances her financial savvy. Further, establishing a Durable Power of Attorney and Health Care Proxy allows you to name someone who will make your financial and medical decisions if you are unable to make them for yourself. Creating an estate plan harnesses the power that you now have to control who will manage your affairs and benefit from your estate.

Women who balk at making financial decisions will encounter even more difficulty if they must face life alone. Without proper planning, divorce or the death of a spouse can financially jolt a woman. The ticket to independence is proper planning and education. Women must understand their finances and have a strategy in place that will maintain their style of living—even if they are unmarried. Retirement and estate planning are critical steps to be taken to ensuring this independence.

We are here to help.

Best,
Marc

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Source: Article contributions courtesy of Capital Directions and CEG Worldwide, LLC, 2017 www.cegworldwide.com | info@cegworldwide.com. M & A Consulting Group, LLC, doing business as CAM Investor Solutions is an SEC registered investment adviser. We provide financial planning and investment information that we believe to be useful and accurate. However, there cannot be any guarantees. There are many different interpretations of investment statistics and many different ideas about how to best use them. Nothing in this presentation should be interpreted to state or imply that past results are an indication of future performance.

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This post was written by Marc Jimenez, CFA, CFP®

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