An unfettered single life has its pluses; but women who are on their own financially — never-married, widowed, divorced or unwed and living with a partner — encounter unique and challenging retirement-planning issues.
Here are a few hard facts: A woman, on average, earns 76 cents to the dollar a man earns. Women's earning potential is typically 20 percent to 40 percent less than a man's. There are 10.4 million single mothers in America. For the last 25 years, women have been marrying later. The average age of U.S. widows is only 56. Social Security benefits are significantly less for a woman than for a man. Women's average life expectancy is a little over 80 years vs. 75 for men.
Obviously, there's a big need — and big opportunity — when it comes to retirement planning for the woman who's going it alone, and especially so in light of the unprecedented global financial crisis.
"If an advisor learns what's different about these women and how to communicate with them effectively, they will not only ensure that they'll have a client for life but they can really build a female client base: Women typically generate seven referrals if they're happy with someone — whether their hairdresser or financial consultant," says Cindy Wieties, vice president-business development with AIG American General. She leads the "AIG for Women" financial education program.
Single women usually start thinking about retirement later than their married counterparts. That means they inevitably need to play catch-up in order to achieve their long-term goals.
Further, nowadays it is more difficult for many to enter retirement — and certainly more so since the Wall Street meltdown.
"The old idea of turning off the lights at 55, walking out the door without looking back and putting your money in fixed-income are gone," says Mary Jo Harper, vice president and wealth management advisor with Merrill Lynch in Blue Bell, Pa.
"As a retiree, investing is almost a part-time job," she continues. "People really have to work at this if they're going to be successful at it."
The more planning and education advisors provide, the less likely women — particularly those who are alone — will worry about outliving their assets. This is a persistent female fear, now manifest deeper because of the current financial and economic turmoil.
Although the woman alone may have no life partner, the right financial consultant is an excellent partner when the question is retirement-planning advice.
"I always tell women to be their own CFO — to absolutely rely on themselves. It's very important to get them to take charge and not be intimidated by finance, as are older women who are widowed or divorced after many years," says Ami Forte, vice president and wealth advisor with Morgan Stanley in Palm Harbor, Fla.
In working with women on their own, Forte continues, "Make them feel comfortable. Be extremely approachable. Diffuse the fear they have about asking 'stupid questions.' It helps you both to have a better understanding — better for the advisor, better for the client."
Apart from investing in the traditional sense, women who are alone should invest in several other ways to protect themselves financially and to secure their retirement. Sheryl Garrett, founder of The Garrett Planning Network, with 300 member FAs, and co-author of Money without Matrimony (Dearborn 2005), tells it like it is: "There are a whole bunch of nuances to make sure you're covering your butt."
These include building good credit, saving in the woman's own name and insuring her own possessions if unmarried and co-habitating. Moreover, Garrett advises the middle-aged woman to make "a good investment in her ability to earn money." This might include switching to a less physically demanding or stressful line of work from the one she's pursued in her youth.
A comprehensive financial plan for the woman on her own is of course essential. "Women tend to think long-range better than men," Forte says. "Projections are very comforting: 'What do you need to save now to be where you want to be down the road?'"
While women can expect Social Security to be a percentage of their retirement income — though only 39 percent after Medicare deductions for those retiring at 65, studies say — these payments, for several reasons, should not be relied upon heavily.
Garrett, based in Shawnee Mission, Kansas, advises that, barring serious illness, women — and men too — should "wait until the very last moment" — age 70 — to sign up for Social Security benefits "because that's when you get the highest pay-out."
When a middle-aged woman is widowed suddenly and has no retirement plan, it is imperative that she link up with a financial advisor right away.
"I can't tell you how many times this is where I've stepped into the relationship," says Merrill's Harper. "The woman has never even written a check! You have to begin educating her about everything — walk her through all the steps and talk about life issues."
Pension-Like Income and Long-Term Care InsuranceFor the older woman who is single or divorced and has put off saving for retirement, a second assured income stream, along with Social Security payments, is a fine idea.
"There are a lot of investment products today that act like a pension and offer a guaranteed income stream for the rest of your life," says Harper. "For someone who has not had a lot of investment experience, some of the guarantees tend to be attractive."
One way for widows to get set with a lifetime-guaranteed stream of income is by converting their husband's life insurance proceeds into a single premium immediate annuity (SPIA), says Wieties, in Houston.
