For Better, For Worse, But Maybe for Richer

 

Still laboring under a gender wealth gap, it seems women will get the last laugh.  Whether through inheritance, divorce, or simply outliving their husbands, it is estimated that single women will control $30 trillion in assets by the end of this decade, according to MarketWatch.  Characterized by MarketWatch as having played “second fiddle” for years to their significant other in financial affairs, these women will essentially triple their net worth between 2020 and 2030 as they take over management of their money that in most cases had been done by their now-absent male partner.

How will they handle all that wealth?  For many it will be intimidating.  My own wife fears taking over managing investments if I die, although I tell her she would do just fine.  She has handled financial matters in our home before and did a fine job.  I know several divorcees and elderly widows who have managed quite well as singles.  But I also know others who have not, who have suffered from poor decisions their husbands made, were left nearly broke from expensive divorce proceedings and a less than just settlement, or who feel completely lost around bank and investment accounts.  (And to be fair, I also know widowers who have struggled with the same.)  Of what pitfalls should these newly single women be aware?

First, they should learn as much as they can about Social Security.  No, that is not a pot of gold they get all at once, but over time Social Security benefits amount to a substantial sum.  Making wise and timely choices about that benefits program can pay huge dividends.  I’ve written before about a good resource for learning more about Social Security.

A divorcee after at least ten years of marriage?  Depending on if and when she remarried, she can claim benefits under the former husband’s earnings, and he doesn’t have to give permission or even know about it.  

Were she and her husband both claiming benefits under their respective earnings record, then the husband died?  Only the higher benefit of the two will continue; she will not collect both.  This can mean a huge cut in monthly income.

A widow can collect survivor benefits from her deceased husband’s earnings record and wait until later to claim her own potentially larger benefits.  (A widow can only collect one or the other; but each year she waits to collect her own benefits the monthly amount she will collect will grow by as much as 8%, until it maxes out at age 70.   If she had spent a good deal of time in the workforce, by that time her own benefit may well exceed the survivor benefit.)

Did the deceased husband have a pension, and did he select dual life annuity or single life annuity?  If the latter, the pension payout ends with his death.  This trips up many couples who opt for the bigger monthly payout of a single life annuity, not realizing it is only bigger because the income is only guaranteed for the pensioner, not his survivor.

There are tax implications, of course.  Filing single instead of married/jointly comes with a different tax rate.  There is a lower threshold for determining when Social Security benefits are taxed (yes, up to 85% of Social Security income can be taxable).  And living alone is more than half expensive as two living together.

Women tend to invest very conservatively, when they invest at all.  This can serve them well in some situations, but it is not a reliable means to preserve or grow wealth.  It is estimated that nearly 70% of women who were in a marriage/relationship in which the male partner hired a financial advisor will NOT use that same advisor after the male’s death.  Hopefully that means they are searching for a more compatible advisor, perhaps a woman, who can better understand her struggles, her worries, her style of dealing with money.  Believe it or not, I read an article that said men were MORE likely than women to seek financial advice.  True or not, financial security can make life simpler and more enjoyable for the single woman.  If she’s comfortable with her situation, has the confidence in her knowledge to handle all things financial, and has a budget that is workable and is working, that woman should do just fine.  Anything less than that might well call for professional advice.  Just find an advisor you are comfortable with.

Until next time,

Roger

“She is clothed with strength and dignity; she can laugh at the days to come.  She speaks with wisdom, and faithful instruction is on her tongue.  She watches over the affairs of her household and does not eat the bread of idleness.” Proverbs 31:26, 27 NIV*

*Scripture quotations taken from the Holy Bible, New International Version® NIV® Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™ Used by permission.  All rights reserved worldwide.