Wise Women & Money

     Is your legal and financial house in order? Are you prepared to address the potentially catastrophic financial threats unique to women? In this article, we will review some of these threats, so you can take steps now to meet them tomorrow.

Facts of Life

     Women comprise more than 50% of the United States population.¹ During her lifetime a woman may have many roles, to include daughter, aunt, wife, friend, mother, grandmother or great-grandmother. Traditionally, in the context of her family relationships, a woman is likely to be the nurturer and caregiver. She rears the children (and perhaps grandchildren), cares for her husband, her parents and even her in-laws. Her selfless devotion to family (and friends) is priceless.
     If she works outside the home (or is single), however, a woman can expect to earn less than her male counterparts. In 2000, the median female income was $20,311 and the median male income was $31,040.² Not surprisingly, a 25-year-old female college graduate will earn $523,000 less than her male counterpart over her working lifetime.³

Facts of Divorce

     Given the divorce statistics, matrimony can turn into acrimony. When it does, contrary to popular myth, men do not lose their shirts through divorce. In fact, research shows that typically, when couples divorce, the woman's standard of living drops by 26%, while her ex-husband's increases by 37%.⁴
     There are many reasons for this gross financial discrepancy. A common mistake made by divorcing women is failure to separate the emotional aspects of dividing marital assets from the cold reality of dollars and cents. For instance, a divorcing woman may fight to keep the family home, only to surrender any interest in her husband's retirement plan. Thereafter, if she cannot afford to make the mortgage payments, then she may lose the family home in a forced sale, pay capital gains taxes on the profit and downsize to a more affordable arrangement. Meanwhile, her ex-husband's retirement plan will continue to grow through the miracle of tax-deferred compounding until withdrawn.

Facts of Widowhood

     Even if men seem to have the advantage when it comes to annual income, lifetime earnings and post-divorce financial recovery, they do not live as long as women. In fact, women tend to outlive men by seven years⁵, and, while 80% of men die married, 80% of women die single.⁶ Behind these numbers, however, are many financially-strapped widows.
     Older widows without personal savings often find their income drastically slashed by the loss of a spouse. Only 21% of women receive survivor income based on their husbands' pensions. The average elderly widow receives only 40% of the Social Security benefits of a married couple.⁷ And, among the elderly poor, 75% are women; 80% of whom were not poor before they were widowed.⁸

Facts of Retirement

     Consider this: 80% of retired women have no pension benefits.⁹ Married women who have worked outside the home (and often concurrently inside the home) and single women qualify for lower Social Security benefits and have smaller balances in their employer defined contribution plans (e.g. 401k plans, profit sharing plans, etc.) than their male counterparts.¹⁰ Why? In their traditional role as nurturer and caregiver for children and aging parents, women miss an average cumulative total of 11.5 years in the workforce.¹¹ This selfless service not only impacts their annual income, lifetime earnings and post-divorce financial recovery, but also their eligibility for employer defined benefit pension plans and their participation in employer defined contribution plans. Accordingly, they do not have as much available to sustain them in retirement.

Financial Fundamentals

     We have reviewed some potentially catastrophic threats to your financial security. Now is the perfect time to take some practical steps to avoid them.
     Rule #1: Do not go it alone. Assemble professional advisors who will look after your interests first. You will need a team of advisors with expertise in financial planning, taxation and law.
     Rule #2: Educate your advisors about your current financial position and your financial goals, so they can create, implement and monitor your comprehensive financial plan.
     Rule #3: Do not delay! Procrastination is the deathbed of good intentions.

1. U.S. Census Bureau, Table DP-1. Profile of General Demographic Characteristics for the United States: 2000, 8/17/2001
2. U.S. Census Bureau, Money Income in the United States, 2001
3. Women's Institute for a Secure Retirement, WISER
4. Ibid
5. Christian Science Monitor, 2002
6. Women's Institute for a Secure Retirement, WISER
7. Ibid
8. U.S. Census Bureau, Business & Professional Women's Foundation
9. Ibid
10. Business Women's Network, Retirement and Women, WOW Facts 2002
11. U.S. Department of Labor, 2002

Wise Women & The Law

     As noted in Wise Women & Money, a woman is likely the nurturer and caregiver in her family relationships. But, while she is busy meeting the needs of others, a woman may forget to take care of her own needs...even needs as fundamental as her own Life & Estate Planning. Who will take care of her, the important people in her life and her property if she is incapacitated and unable to do so? Who will be the caregiver for the caregiver? What will be her legacy at death? What Life & Estate Plans have you made?

Life Planning

     Would your loved ones be prepared to take care of you and your fundamental responsibilities if you were incapacitated? The law says adult Americans must make their own personal, health care and financial decisions. Without proper Life Planning your loved ones will be unable to step in and handle important personal, health care and financial decisions for you.
     In the absence of proper planning, your loved ones may have to go to court to obtain the legal authority required to make your personal, health care and financial decisions. This likely will be an expensive, inconvenient and unpleasant experience for them.

Estate Planning

     If given the choice of planning for their own death or incapacity, most normal people would choose anything else. It is just human nature. Nevertheless, no one wants to be remembered for leaving a legal and financial mess for their loved ones to sort out. What, if any, legal arrangements have you made? How do you want to care for your loved ones, or provide for charities or pets, when you are no longer around?
     If your spouse were to remarry after your death, will your Estate Plan protect your assets for them in the event of a subsequent divorce or for your children should your spouse predecease his next spouse?
     If you have minor children, regardless of whether you are married or single, you should make legal arrangements for their care in the event they become orphans. Who will provide a safe and secure home for them, as well as help develop their moral character? Who will manage their inheritance and protect it for them and from them? The failure to address these issues may negatively affect your children well into adulthood.
     Even if you have no children, you likely have definite ideas about who should or should not inherit your assets. Only proper Estate Planning can fulfill your objectives. In the absence of an Estate Plan documenting your instructions, state law will control. In most instances, these laws would distribute the estate assets to your surviving next-of-kin, which may differ greatly from your wishes.

Summary

     In the midst of caring for her loved ones, every woman should take time to make proper Life & Estate Plans. It may be one of her most thoughtful gifts.

Copyright © 2005 Integrity Marketing Solutions. All rights reserved. Some artwork provided under license agreement. This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.