Being single presents different financial planning needs than being part of a couple—and being a woman adds a layer of complexity. Whether a woman is divorced, widowed, or otherwise single, these strategies can help you take the best approach to ensuring financial security for single women clients. Once you’ve read through them, check out the case studies below, which you can use as models in your practice.
Evaluate the Current Financial Landscape
Start by understanding your client’s individual situation, along with the societal factors inhibiting financial security for women overall.
Push for fair compensation. In 2020, women earned 82.3 cents on the dollar compared with men. You can help your clients close this pay gap by:
- Helping build a strong financial plan, including solid savings and emergency funds, that can make her more comfortable pursuing a higher-paying job or asking for a raise or promotion.
- Bolstering your client’s negotiation skills and preparing her for salary review conversations.
Offer financial literacy learning opportunities. Consider hosting seminars on financial literacy topics such as buying a home, saving for retirement, or investing.
Case Studies: Meet Sharona, Tonya, and Lorinda
Use these hypothetical case studies as a roadmap to approach elevating financial security for single women.
Sharona, 64, divorced. Sharona has a long work history and sufficient assets for retirement. She was married to her ex-husband for more than 20 years, and they have an adult daughter.
Social security planning:
- Sharona is eligible for half of her ex’s full retirement age (FRA) benefit amount. She has the option to begin collecting social security benefits even if he decides to wait.
- With her work history, however, her benefit is higher than his, so she won’t get a spousal benefit. That means her social security benefits will be based on her life expectancy—if she anticipates living past 80, she’ll be better off delaying these benefits until she is 70.
- Review Sharona’s beneficiary designations. At least 26 states have statutes that automatically revoke beneficiary designations naming a spouse in the event of a divorce. Also revisit estate planning roles such as attorney-in-fact, health care proxy, and executor.
- If Sharona remarries, she may consider incorporating a qualified terminable interest property (QTIP) trust in her estate plan. In the case of her death, her second husband could access the income from the trust assets and live in any homes held by the trust, but not sell, transfer, or bequeath the assets.
Tonya, 57, single, no children. Tonya owns several successful businesses. She has significant assets, and she doesn’t expect to have an estate tax concern due to her commitment to philanthropy.
Social security planning:
- Because she’s self-employed, Tonya pays both the employee and employer portions of social security tax. As she approaches FRA, she may be able to boost her benefit by eliminating some of her business deductions for a few years—her social security tax is based on her businesses’ net income. Coordinate with her CPA to make sure the elimination of deductions is worth the increase in social security benefits.
- Without an estate plan, Tonya’s assets would go to a parent, sibling, or more remote family members.
- To provide for siblings, nieces, nephews, and charities, she may need a will and a revocable trust, in addition to a valid power of attorney and health-care power of attorney. Consider using a corporate fiduciary to act as executor or trustee.
- Tonya may prefer taking an asset-by-asset approach rather than dividing her estate to enable her to designate assets to her favorite charities along with her family members.
- Tonya should start identifying key employees to run her businesses after her passing. Executing and properly funding a buy-and-sell agreement can provide assurance that her hard work will endure.
Lorinda, 56, widowed. Lorinda was married to her first husband for 10 years and her second husband, Allard, for 4 years. She has a teenage daughter. Having little employment history, she doesn’t qualify for her own social security coverage. Allard left her more than $30 million when he passed.
Social security planning:
- Lorinda can access some benefits immediately. Her daughter could receive a survivor’s benefit until she reaches age 18 or 19, and Lorinda could be eligible for the child-in-care benefit until her daughter reaches age 16.
- Lorinda is not eligible for a spousal benefit from her first husband.
- Lorinda’s estate planning documents should reflect the level of wealth she now controls. Because Allard passed away with more than the current $11.7 million exemption for estate gifts, Lorinda should elect portability on Allard’s estate.
- Lorinda may need assistance in managing her wealth. Review all of her finances, walking through strategies she could employ, and help shape her future, including the legacy she wants to leave.
Build a Foundation for Success
Navigating financial planning for single women presents unique challenges and considerations. By taking clients’ individual situations into account, you can provide tailored strategies geared toward success—helping the single women on your client list build secure financial futures that align with their long-term goals.