Women in their 50s and 60s who are newly single—typically due to divorce or the death of a spouse—can run into unique wealth planning challenges. In many cases, if you’re a woman at this stage in life, you may have previously relied on your spouse to take the reins on your wealth planning process, and now have to take on this responsibility for yourself. This is especially true among those in the Baby Boomer generation. Below are a few complications newly single women may face and ways that you can thrive in your newfound financial independence.
Planning for Retirement as a Newly Single Person
If you’re a woman who is newly single in your 50s and 60s, you may need to adjust your retirement planning to ensure that you’re now on track as a single person, rather than a couple. Retirement as a single person vastly differs from that of a couple and can entail a number of changes. For example, if both spouses had retirement savings in IRAs and 401(k)s, that amount is now limited to account balances of one person. There are a few issues you need to consider pertaining to your retirement.
Is Your Retirement on Track?
There are a lot of variables in making sure you’re on track for retirement, which includes your own retirement savings balances. You should also consider any amount you might receive from your ex-spouse’s retirement plan as part of a qualified domestic relations order (QDRO) in the event of a divorce or any life insurance proceeds if your spouse has died. It's important to take advantage of all opportunities to contribute to your own workplace retirement plan. Women 50 and over can also contribute extra amounts as catch-up contributions each year.
Claiming Social Security Benefits
It’s important to understand the process for claiming Social Security benefits, wherever applicable to the situation. Should you claim your own benefit, a survivor’s benefit in the case of a widow or a benefit based on the earnings record of your ex-spouse in the case of a divorce? Variables such as whether or not you’re still working will play a big role in your decision.
Managing investments and retirement assets as a single person can be especially challenging if you weren’t previously involved in this aspect of you and your spouse’s financial life. It can also be an issue if you and your spouse hadn’t disclosed to each other which assets were held in each person’s account. You’ll now need to assess what you have in terms of investment assets and ensure this money is properly allocated for your own financial safety and growth.
Long-Term Care and Healthcare
It’s important to formulate a plan for long-term care in retirement, if necessary. This includes looking at retirement communities and ensuring you have a plan to cover healthcare costs during your pre-retirement and retirement years. If you’re employed, you may be able to move onto your employer’s plan or consider Medicare coverage if you’re 65 or older.
Managing Your Own Finances
For some women in this situation, managing your own finances is new. Working with a trusted advisor can help guide you on the right path as a newly single person.
For many women, it may be your first time working directly with a financial advisor. A financial advisor may have worked far more directly with your spouse, which is a common situation for couples in this age range. Whether you continue to work with your current financial advisor or hire a new one, it’s important for you to ask a lot of questions and ensure your advisor understands your financial goals. Some of these might include:
Beneficiary designations on retirement accounts, life insurance policies, annuities and any trusts should be adjusted to reflect your newly single status. Since beneficiary designations determine how these assets are distributed, updating them is a critical step here.
Wills and estate planning documents, as well as the ownership of assets, should also be adjusted to reflect your newly single status. For example, if you now own the former marital home outright, the home should be retitled to reflect this change. The same applies to any accounts, such as investment accounts, bank accounts and others.
Retirement and Investment Accounts
These need to be consolidated and managed for your benefit. For those who are newly divorced, this means taking an array of accounts and investment assets and ensuring these are consolidated and allocated in a fashion that supports your financial planning efforts as a newly single individual.
If you’re a newly single woman, you’ll need to adjust your tax planning based on your income and other factors that are now financially different.
There are differences between filing a joint return when married and filing as single. It's important, if you’re newly single, to work with a tax professional who understands your changing situation and can offer you guidance. For example, if you’re a widow who has a dependent child, you can file jointly for two years after the death of your spouse under the qualifying widow status.
You’ll also need to review your life insurance needs in light of your new situation. This is especially crucial if you still have minor children or other dependents who would need a death benefit in the event of your passing.
If you’re a woman in your 50's and 60's and are newly single, an experienced advisor is a great way for you to take hold of your financial future and make a seamless transition into financial independence.