Category: Suddenly Single

What Makes Women’s Planning Needs Different?

While both men and women face challenges when it comes to planning for retirement, women often face greater obstacles.

Women, on average, live longer than men.  However, women’s average earnings are lower than men, according to a recent article in “Investment News,”  in part because of time taken off to raise children.  What this means is that on average, women tend to receive 42% less retirement income from Social Security and savings than men.

The combination of longer lives and lower expected retirement income means that women have a greater need for creative financial advice and planning.  The problem is finding the right advisor, one who understands the special needs and challenges women face.

A majority of women who participated in a recent study said they prefer a financial advisor who coordinates services with their other service professionals, such as accountants and attorneys.  They want explanations and guidance on employee benefits and social security claiming strategies.  They want advisors who take time to educate them on their options and why certain ones make more sense.  Yet many advisors do not offer these services.

Men tend to focus on investment returns and talk about beating an index.  Women tend to focus more on quality of life issues and experiences, on children and grandchildren, on meeting their goals without taking undue risk.

If your financial advisor doesn’t understand you and what’s important to you, it’s time you look for someone who does.

How Advisors Can Help Surviving Spouses

Investopedia published an article we authored.

When the subject of death comes up, a term that’s often used to describe the feelings of those left behind is “loss.” But there is more to that loss than the loss of companionship. There’s also the loss of information, especially if the person who died also handled the family finances.
In my 30 years of experience advising families I have often had to help and council widows who depended on their husbands to manage the family finances. It’s fairly common for families to have several investment relationships. It’s quite rare to find that the spouse who managed the money actually did a good job keeping records and keeping his spouse “in the loop” when it comes to money management. And when her spouse dies, the widow has to deal with a host of organizations whose primary focus is on making sure that they don’t distribute money to anyone who is not entitled to it. The liability is too great. So we typically have a widow dealing with the death of a loved one, plus the Social Security Administration, the husband’s pension plan, and two, three or more brokerage firms who handled the couple’s investments. (For more, see: Estate Planning: 16 Things to Do Before You Die.)

Who Handles the Finances?

One of my earliest experiences was with a widow whose husband took care of all the family finances. He made the investment decisions, paid the bills and balanced the checkbook. He died suddenly and his wife did not know what to do. Childless and with no near relatives, she needed help. (For more, see: Estate Planning for a Surviving Spouse.)
While her husband’s will was up to date, during our first meeting she revealed that she knew nothing about her financial condition. She did not know how much she was worth, what her income sources were or what it cost her to live. It took a while to learn where all the investments were, what her income sources were and how much she needed to maintain her lifestyle. (For related reading, see: Advanced Estate Planning: Information for Caregivers and Survivors.)
Over the years I found that this situation was not uncommon. Balancing a checkbook, paying bills and making investment decisions does not appeal to a lot of people. They are happy to allow their partner to do that for them. The problem with this division of labor does not appear until the individual in charge of the finances disappears either through death or incapacitation.

Helping Manage the Transition

This is the point at which a trusted financial advisor can ride to the rescue. A good one is willing to go through records to see what it takes to run the household. He will be able to determine the survivor’s income. He will know how to identify the family’s investment and bank accounts even if the records are incomplete. Just as important, a financial advisor should be willing to provide more than simply financial advice to the surviving spouse. This is the point where questions arise about selling the extra car, upgrades around the home, moving to be nearer the children – or moving into a senior living facility. These may well be the questions a trusted advisor is able to answer. (For more, see: 6 Estate Planning Must-Haves.)
Advisors who are simply money managers will, at this point, probably find themselves replaced. According to PriceWaterhouseCoopers’ Global Private Banking/Wealth Management Survey, 2011, more than half (55%) of the survivors will fire their financial advisor following the death of a spouse. A lot of that will be due to the changing level of service that a surviving spouse needs. (For related reading, see: Why Do Widows Leave Their Advisors?)
But there is actually a better answer to the financial confusion that often follows a death. The best time to gather comprehensive information about family finances is when the couple is still alive.

Why a Will Might Not Be Enough

With due respect to the legal profession, will and trust documents are written to specify how assets are to be distributed at death. With few exceptions, they rarely get down to the kind of detail that allows the surviving spouse to take up where the deceased has left off.
What is needed is a specific book of instructions itemizing financial assets, their location and their ownership. Income will be vitally important to the surviving spouse. Realizing that income will change once one’s spouse dies, it’s important to know what the survivor’s income sources will be. Finally, the cost of maintaining the surviving spouse can be determined while both are still alive much more easily than after one has passed away. And since so many transactions now take place via password protected Internet portals, the survivor needs a list of those portals and passwords. (For further reading, see: The Importance of Estate and Contingency Planning.)
When someone dies, the surviving spouse will always have a period of grieving. But if a little though is given to preparing for the inevitable, grief does not have to be accompanied by fear of an unknown financial future.

To make it easy for couple who want to plan, purchase a copy of our book: BEFORE I GO and the BEFORE I GO WORKBOOK. 

How to connect with your spouse about finances

Too many spouses don’t share enough information about family finances. It’s not unusual for one spouse to take care of investments and pay the bills. The other spouse may not be interested or may be too busy. It’s a fact that not everyone is interested in investing, budgeting or banking.

But this can lead to a bad outcome in case of death, divorce or separation. In fact, money is one of the top 10 reasons for marriage breakdown.

Money or anything related to finances can be a possible cause of disagreement between many people – including couples. Married couples, whether they are happy or not, may have disagreements over little financial issues to much bigger shared financial responsibilities or unequal monetary status. Money may not always be the principal cause but in fact is usually combined with other forms of reasons for divorce. In any case, it is still a significant contributor and should be managed with fairness from both sides, mutual understanding and a tiny dose of compromise.

But even couples that are financially compatible should sit down from time to time to review their financial situation. Our books: BEFORE I GO and BEFORE I GO WORKBOOK were written to help people do this.

If there is a difference in the financial mind-sets of a couple, a financial advisor may be able to act as a facilitator to reconcile the differences.

A financial advisor can educate the couple about investing, budgeting and retirement planning. Regular meetings with a couple’s financial advisor provide them with the opportunity to share critical family financial issues, keep everyone informed and help resolve issues before they lead to conflict.

Having a trusted financial advisor in place, one who is already familiar with a couple’s finances, can also help in case you find yourself “suddenly single.”

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Preparing for the unexpected.

What happens if you have to live on less income because you lost your job or your spouse died? The economy has not been kind to many people and job loss can happen before we’re ready to retire. That’s when a financial advisor can help.

It can be tough to find a good paying job if you’re within a decade of retirement age.  Companies are reluctant to hire you.  You may be wondering what you should do when you realize that the best path is early retirement. Where can you cut back? How should your money be invested for an extra-long retirement? These are all questions that you should not tackle on your own because the wrong decision at this age can haunt you a few years down the road.

If the major breadwinner in your family dies how will the survivor cope? One 61-year-old woman left work to care for her dying husband. After his death she could not return to work but had a lot of decisions to make. Decisions about social security, insurance, where to cut back (fewer trips, sell the motorcycle and the RV), as well as decisions about her investments.

Each case is unique, but a financial advisor should be more than a money manager. He should advise his clients about all aspects of their lives that impact their financial well-being. Ideally you will have developed a good relationship with a financial advisor before an unfortunate event occurs. But if you have not, this is definitely the time to find one.

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Three things you must do as you get older.

There’s a famous saying that I have come to appreciate: “Old age isn’t for sissies.”  There are lots of things that begin to bother us as we age that never did when we were young.  Aches and pains are the most obvious of them.  A lot of us become much too familiar with our doctor’s waiting room.

After a lifetime of storing memories we find that too many things have gotten lost in the pile of “stuff” that we keep in mind.  No one really wants to admit that we’re not as strong or “sharp” as we once were.  So instead of taking care of our own yard or doing our taxes, we hire someone else to do it.

Aging is a sensitive topic.  It can be awkward to tell people that they may want to look for help doing things they have always done on their own.  But it is something that has to be done because it’s just the right thing to do.

I have had this conversation with a number of clients as they age.  Sometimes they even bring up the subject.  One of my best clients, let’s call him Bill, was diagnosed with cancer a year ago.  He went through a series of treatments, but he finally came to the realization that the end was probably near.  I met with Bill and his wife and we had a long, heartfelt conversation.  He and I had worked together for years to manage his portfolio and he made me promise to take care of the family finances after he was gone.   I had already given them a copy of my book “Before I Go” and the workbook that goes along with it.   As a result, after he passed away we did not have to wonder about the family’s assets or what his wife’s income was going to be.

But for many people, the end doesn’t give us as much time as Bill had.  It may be an accident, a sudden heart attack or a stroke.  That’s why it is best to prepare while both husband and wife are still healthy and able to make informed decisions.  What should those preparations include?

  • Make sure your will is up to date.  Check with an estate planning attorney to make sure it is current with your current family situation and the tax laws.
  • Prepare an Advance Medical Directive that will tell your family and physicians what you want done if you become incapacitated.
  • Find someone who can provide quality financial guidance to the surviving widow or children if that is not something that they have the knowledge, time or interest in taking on.

The last one is often over looked, but it is critically important to those you love and would leave behind.  You need to find a person or team who puts your survivors’ interests first.  Someone who knows how to generate the income that retirees need.  Someone who is experienced in retirement planning and estate management.  Someone who you can trust to manage your assets now, and do the same for those you leave behind.

It’s a challenge, and one that you should take care of now because you never know when it will be needed.

Arie Korving is the author of the book “Before I Go” and the “Before I Go Workbook”  and Chairman of Korving & Company, a Registered Investment Advisor in Suffolk, VA.  For help with this and other subjects on estate planning, he can be contacted at 757-638-5490.  To get a copy of his book and workbook, visit Amazon.com or call Korving & Company, 757-638-5490.

Death and Taxes

The old saying about death and taxes being the only things that are certain is only partly true. Taxes change. Death is certain. The end of our lives is something that we face only reluctantly, if at all. When someone close to us dies, the effect is al­ways sadness. When a spouse or parent dies, the effect is traumatic.

Because death is an unpleasant subject, most people prefer to spend their time thinking of more pleasant subjects.  They believe that they have done their planning if they meet with an attorney to have a will or trust document prepared.  Once this is done the feeling is that the planning process is complete.  Unfortunately that’s rarely true.  This traditional view of estate planning gives your heirs the view from thirty thousand feet but often fails to provide the guidance that surviving spouses or children really need.  Here is an example from real life.

Sue Smith (not her real name) became a widow after her husband, Sam’s, brief illness. Sam had a small account with me but the bulk of his portfolio was distributed among a number of different investment firms and mutual fund custodians.  Only Sam had a complete picture of the family’s finances and he rebuffed suggestions to consolidate his assets and do planning beyond reviewing his will on a regular basis.  Sam retired after a career as an executive at a large corporation.  He had been a take-charge guy all his life, both at work and at home. He had been the sole income earner, made the investment decisions and paid the bills, while Sue was in charge of the home and children. They were a very typical couple.  Both were healthy, until Sam had a sudden stroke that left him incapacitated and led to his death a few weeks later.  Sue was suddenly alone.

In a matter of hours Sue had to make a number of decisions. Some required immediate action, such as the selection of a funeral home and the arrangement of the funeral service.  Shortly after the funeral Sue realized she needed help and asked me to be her “financial advisor” and I agreed.  We met at her home to gather basic information.  I began by asking her basic questions.  What was her income now that she was single? What level of income would she need to maintain her lifestyle?  Did she have any debts?  What were her regular bills and how were they paid?  What were her financial assets and where were they?  Did her husband have a life insurance policy or annuity?

The answer to all of these questions was “I don’t know.”

The psychological result of being left alone and unsure of herself was severe.  Sue was overwhelmed. This was a crushing burden to fall on someone who had never been required to take care of financial issues. It was as if a child had been dropped in the middle of dark woods with wild animals prowling around. The result was not only deep sadness but also fear and paranoia. Since her husband had always taken care of the fam­ily finances, she felt unprepared to handle major decisions and was terrified of being victimized. And because Sam had not left an in­struction manual for her, Sue went through a long period of grief combined with anger and confusion.

Since Sue did not have a the information that we needed, we had to go through Sam’s files, make phone calls and watch the mail and as bills and statements came in to get an true picture of her assets, income and expenses.  It took several months before we had a good handle on her finances.

Fortunately, Sam left Sue with a sizeable estate and I was able to provide all the income she needed as well as leaving a sizeable inheritance for her heirs.  However, Sue never over­came the issues that surfaced after her husband’s death, and it made her life as a “suddenly single” person very unhappy.  Sam never provided her with the guidance she needed once he was gone and it affected her in a very profound way.

As a result of my experience with Sue and a number of other widows who came to me for help, I prepared a manual that became a book, Before I Go, which I provide to all of my clients.   It provides the answers to the questions that are not addressed by the usual estate planning documents but are the questions that those who are left behind need to know.  The view from thirty thousand feet is not enough when it comes to managing the family finances and too often the details are ignored unless couples are made aware of the need for detailed planning that goes beyond preparing the will or trust.

 
 

Working with Widows

Advisors who work with widows know that there is often a great deal of confusion after a spouse dies.  Widows are often told not to do anything for a year.  This is terrible advice.  First of all, assets held in joint name have to be transferred into the name of the surviving spouse.  Beneficiaries have to be updated on retirement accounts and insurance policies.   Trusts and wills have to be reviewed.  And investments that were made and understood by the deceased are often not appropriate for the survivor. 

The best advice for the widow is to find a trustworthy financial advisor, explain the situation and allow the advisor ro guide the widow through the process of getting on with life.  Of course, it’s easier if the has a copy of the Before I Go Workbook to help.

© 2021 Korving & Company, LLC