According to a Pew Research Center study, women are about twice as likely as men to age alone, with one-in-five women ages 60 and older living in a solo household (20%), compared with one-in-ten men (11%). This means that, regardless of whether a woman has been with a spouse or a partner during her lifetime, the likelihood is that she will live on her own at one point or another.
For various reasons, solo women have very unique financial planning needs. To begin with, they likely do not have a partner’s income to rely on, and even if they are the beneficiary of a life insurance policy or an IRA, the rules and confusion that come with inheriting money can feel overwhelming. Furthermore, since women are often paid less than their male counterparts, they likely have less money to invest for retirement.
But that doesn’t mean it’s impossible. Below are five ways to manage your money and prepare for retirement or disability if you’re one of the over 66 million women in the U.S. who are either widowed, divorced, or never been married.
Be prepared for the unexpected
If we have learned anything from the years 2020 and 2021, it’s that you never know when you’ll need an emergency fund. For single women, it’s even more important to be prepared, as you won’t have a partner’s income to rely on in case of emergency.
Generally it’s advised to have at least six months’ worth of living expenses saved, but the more you can squirrel away, the better. We recommend aiming for nine to twelve months, and you might even want to consider tacking on more once you get closer to retirement age.
Additionally, you should invest in disability insurance. Without a spouse to help you out, it is doubly necessary to have disability insurance. You’ll want to put aside a bit more than what your employer provides, so you have enough in savings that you don’t have to dip into your retirement fund in the case of an emergency.
Putting aside extra funds is especially important if you are a high-earner or if you work primarily on commission or incentives for two reasons. First, many disability insurance policies do not use bonuses and commissions in their calculations, and second, policies often cap benefits between $5,000 and $10,000 per month.
Get into the habit of investing
In general, despite the fact that women have longer life expectancies than men, they tend to have less in retirement savings. It’s critical to start thinking about and planning for retirement early on in order to save up enough money, so be sure to take advantage of any employer offered retirement perks, such as 401k matching. If your employer doesn’t offer retirement benefits, be sure to open up an account for yourself, such as a Roth IRA or a Health Savings Account (HSA).
You should invest in your retirement at the very least, ensuring you are taking advantage of your employers match, and if you have extra income, consider investing in a brokerage account to build up your wealth. Although it’s never too early to start investing, getting an early start is especially helpful, as it allows you to benefit from the power of compound returns.
Assess your cash flow
Examine your income and expenses and create a cash flow analysis. Take the extra time to write everything down so that you have records of your cash flow and budget as they evolve. Doing this allows you to get a better idea of what your expenses will be like after retirement, helping you to be prepared.
A helpful tip is to get in the habit of taking a set percentage or amount off the top of each paycheck and putting it into a separate savings account. This allows you to almost effortlessly put aside money for your future self. Additionally, we recommend adding a fixed percentage that you will save monthly.
For example, you might choose to save 5% for your general savings and 5% for your retirement. If your expenses make it difficult to put money aside, consider lifestyle changes like eating out less or taking fewer expensive vacations.
Hire an attorney
An estate planning lawyer will help plan for how your assets will be dispersed or managed upon your incapacitation or death. Many single women overlook this step in preparing themselves for retirement, in part because estate planning can be misconceived as something that couples do. After all, single women don’t have spouses relying on them and may not have children to care for. However, hiring a professional ensures that you don’t miss something important in your planning.
Consult with a financial advisor
On a similar note, finding the right fiduciary financial advisor is a critical piece of the puzzle. An advisor can help you gain a thorough understanding of your financial situation and get you on track to live a comfortable retirement. After all, the ultimate goal of your money is to live your best life possible in your second act.
At WH Cornerstone, we address your values, your vision and your reality in order to gain a clear picture of where you are and where you’re going. Contact us today to begin your retirement journey.