Some of the most stressful life changes for women include the death of a spouse, divorce, and retirement. Every woman handles things differently, so there’s no “one way” to do financial planning at every stage in life. But here are a few helpful financial planning tips for women once they experience a major change in their life.
After Divorce/Spouse’s Death
Because of the sudden change in your life situation, whether through divorce or the death of a spouse, it would be a suitable time to get an objective review of your finances. Find someone who can provide an unbiased opinion about your financial position, as well as suggestions to help you through the transition from married to single. Talk with others who have been through the same situation and glean from them wisdom on how to deal with your new circumstances. There’s no need to go through this process alone. Financial decisions that may have been wise as a couple may no longer be needed now.
One thing you will definitely need to do is revisit the beneficiaries listed on your various financial accounts and in your will. If you are divorced and your ex-spouse was listed as the primary beneficiary, they will remain unless you change the designation for each account. If your spouse passed away and they were listed as the primary beneficiary, the secondary beneficiary will inherit the asset if you make no changes. However, you should take the time to update your financial assets so that you have primary and secondary beneficiaries who are still alive.
You may find yourself in a tighter final pinch than you were when you were married. A divorced woman usually sees a 27% drop in her standard of living, mainly because she is more likely to be the one raising the children alone (and the financial commitment that comes with that responsibility). Even when divorce occurs later in life when raising children is no longer an issue, the financial toll is still hardest on women. When couples over the age of 50 divorce, 37% of men remarry within 10 years, while only 22% of women do. Why does this matter? Because two-adult households have two potential earners (whether through retirement accounts or jobs) to pay the bills. Everything from housing costs to cars to food costs can be shared, saving money.
For widows, if both spouses were collecting Social Security benefits, the surviving spouse typically qualifies to continue collecting benefits for whichever spouse received more, but not both people’s benefits. Many of your regular bills don’t disappear (such as mortgage payments or utility bills), but you can lose a significant source of income each month.
Regardless of whether it’s through death or divorce, you may find yourself with most of the same expenses but with a sudden drop in income. How can you navigate such difficult circumstances? In the case of death, life insurance can help, but no such insurance exists for divorce (since alimony and child support aren’t insurance and are sometimes not sufficient). One option is to save money by sharing living expenses with someone else. Perhaps you’re not ready yet to share living space with another person, but when you are, it can be a big step in reducing your living expenses below your income level. No matter what you decide, if you have been involved with managing your finances over time and have been saving on your own, you have the opportunity to begin from a stronger financial position.
Retirement
While the goals of accumulating wealth and paying off debt may be taken care of by the time you reach retirement age, that doesn’t mean that your financial journey is complete. Financial planning is something that continues for the rest of your life. Let’s look at some of the decisions that you’ll need to address during your retirement years.
When you first retire, you want to assess your financial situation to see if you need to adjust your retirement goals. Perhaps your retirement goals have changed, or you are better or worse prepared to meet the financial demands of retirement. You need to have a clear understanding of where you stand so that you can make changes early on to ensure that you stay on the road to success.
A common mistake in the early retirement years is overspending. You may have a significant amount of money saved up but remember that your income is no longer what it was during your peak earning years. If your desire is to maintain the same retirement savings throughout your retirement, monitor your withdrawal rate and make sure that it doesn’t outpace your portfolio performance.
As you progress through your retirement, you may want to become more conservatively positioned in your investments. A few years of disappointing returns in your 30s may not be that big of a deal because you have plenty of time left to make that up. But if you’re too aggressively positioned during retirement, it could be difficult to recover from a significant downturn in the stock market or in other investments.
While retirement brings with it more time to do the things you love, it also tends to bring with it higher medical bills and more health issues. Retirees typically spend 10% of their budget on healthcare costs when they’re in their 60s. When they’re in their 80s, that number jumps to 20%. Assisted living options are expensive, but you can buy long-term care insurance to help you with those costs. Make sure that you have an advanced healthcare directive and durable power of attorney so that if you’re not able to make healthcare or financial decisions for some reason, a trusted person can do that for you.
Finally, make sure that your will and estate plans are updated. While a will is the cheapest way to go, a living trust allows assets which are placed in it to transfer immediately upon death, bypassing the time-consuming (and sometimes costly) probate process. Also ensure that the beneficiaries listed on any of your accounts are updated. You’ve worked hard all of your life—you want to make sure that things are passed on the way you want them to be.
No matter what your stage of life, or what changes you’re going through, it’s always a good idea to have someone to advise you on your finances. Whether you opt for a professional or a trusted friend, having someone to give you clear, objective advice is a key step on the journey to financial independence and security. Find someone that you’re comfortable with and let them help you on your financial journey.
About Chase Investment Counsel
Chase Investment Counsel is a family and employee-owned boutique wealth management firm that offers personalized investment services. Our clients include career professionals, those nearing or in retirement, and families experiencing financial transitions such as generational wealth transfer, widowhood, divorce, or sale of a business. Chase’s active, disciplined investment management team is focused on selecting individual stocks and bonds targeted to each investor’s specific financial goals and risk tolerance. Established in 1957 in Charlottesville, VA, Chase Investment Counsel manages approximately $300 million in assets.