The Importance of Planning for Widowhood

 

Jane Young, CFP, EA

Jane Young, CFP, EA

According to the Administration on Aging, in 2010 there were four times as many widows as widowers. Over half of all women over 75 live alone, and one third of all women who become widows are under the age of 65.   About one third of all women who reach 65 are likely to live to 90.  Twenty seven percent of unmarried women, between ages 65 and 69, are poor compared to only 7% for all married women.  Women frequently have erratic work experience, due to family obligations, resulting in lower pensions than men.   Only about one third of all women will receive a pension in comparison to about two thirds of all men.  

These are just a few statistics indicating why it is crucial for women to plan ahead for the uncomfortable, but very real possibility of becoming a widow.  Many couples spend years planning for retirement together, but avoid planning for the possibility of living alone.  Couples need to develop a plan that addresses issues that must be dealt with upon the death of a spouse, as well as a plan for long term financial security for the surviving spouse. 

Start by working with an Estate Planning Attorney, whom you both feel comfortable with, to draft your wills and powers of attorney.  Part of this process should include reviewing the beneficiary designations on all of your retirement accounts and insurance policies to be sure they are consistent with your estate planning goals.  This is also a good time to discuss end of life preferences with one another.

The next step is to organize your finances and ensure that you both know what you have, where you have it, and how it can be accessed.  Take an active role in managing your finances.  If you are uncomfortable or don’t understand your finances, do some reading, take some classes or ask your planner to help you better understand your financial situation.   If you decide to work with a financial planner, take the time to select someone with whom you have complete trust and confidence – someone you can rely on as a trusted resource, should you become a widow.

Ensure that you have adequate emergency reserves to cover funeral expenses and living expenses for several months while the estate is settled.   The loss of a spouse is extremely difficult and you don’t need money worries on top of the tremendous emotional hardship you will be experiencing.

Incorporate the possibility of losing a spouse in your long term financial planning.  Run retirement scenarios and develop a plan that meets your goals together and on your own.  Review and understand survivor benefits associated with Social Security and Employer Pension Plans.  If your projected cash flow falls below your expenses, consider purchasing term life insurance or developing contingency plans to reduce your expenses. 

Here Are Three Simple Secrets to Investment Success

Jane M. Young, CFP, EA

Build a Portfolio to Support Your Investment Timeframe

Investment timeframe is a major consideration in developing an investment portfolio.  Start with an emergency fund covering about four months of expenses in a cash account with immediate access.  Next, put aside money that is needed over the next few years into fixed income vehicles such as CDs, bonds or bond funds.  Invest long term money into a combination of “stock based” mutual funds and fixed income investments based on your tolerance for investment risk and volatility.  Historically, stock has significantly out-performed fixed income investments but can be volatile during shorter timeframes.  Stock is a long term investment; avoid putting money needed within the next five years in the stock market.

Diversify, Diversify, Diversify

Once your emergency fund is established and funds have been put away for short term needs, it’s time to create a well-diversified investment portfolio.   We cannot predict the next hot asset class but we can create a portfolio that will capitalize on asset categories that are doing well and buffer you from holding too much in asset categories that are lagging.  Think of the pistons in a car, as the value of one asset is increasing the other may be falling.  Ideally, the goal of a well-diversified portfolio is to have assets that move in opposite directions, to reduce volatility, while following a long term upward trend.  It is advisable to diversify based on the type of asset, investment objective, company size, location and tax considerations.

Avoid Emotional Decisions and Market Timing

The best laid plans are worthless if we succumb to our emotions and overreact to short term economic news.  Forecasting the short-term movement of the stock market and trying to time the market is fruitless.   We can’t control or predict how the stock market will perform but we can establish a defensive position to deal with a variety of outcomes.  This is accomplished by maintaining a well-diversified portfolio that supports our goals and investment time horizon. 

The stock market can trigger our emotions of fear and greed.  When things are going well and stock prices are high we become exuberant and want a piece of the action.   When things are bad and stock prices are low we become discouraged and want to get out before we lose it all.  The stock market is counterintuitive, generally the best time to buy is when the market is low and we feel disillusioned and the best time to sell is when the market is riding high and we feel optimistic.  We need to fight the natural inclination to make financial decisions based on emotions.   Don’t let short term changes in current events drive your long term investment decisions.

No one knows what the future holds so focus on what you can control.  Three steps toward this goal are to create a portfolio that meets your investment time horizon, create and maintain a diversified portfolio and avoid emotional decisions and market timing.

 

 

Financial Guidance for Widows in Transition

 
A workshop from the heart for women who are widowed

or anticipate becoming a widow in the future . . .

or those with a widowed friend or family member

 Friday, August 3, 2012 from 9:30am – 11:30am 

at Bethany Lutheran Church

4500 E. Hampton Avenue

Cherry Hills Village, 80113

OR 

  Friday, August 3, 2012 from 2:00 – 4:00 PM
 
at First Lutheran Church

1515 N. Cascade Avenue

Colorado Springs, 80907

 There is no charge to attendees, but advance registration is required.
Call 1-800-579-9496 or email Bob.kuehner@lfsrm.org

 Join us for a special presentation by Kathleen M. Rehl, Ph.D., CFP®, award winning author and speaker. She presents practical information in an engaging and entertaining manner, along with issues of the heart. The workshop is open to all . . . although it’s especially designed for women. So, bring your gal friends for an enjoyable morning out together.

   Kathleen’s world changed forever when her husband died. From personal grief experiences, her life purpose evolved-helping widows to feel more secure, enlightened and empowered about their financial matters. She is passionate about assisting her “widowed sisters” take control of their financial future.

 Dr. Rehl is a leading authority on the subject of widows and their financial issues. She is frequently invited to give presentations across the country on this topic.

 She and her book, Moving Forward on Your Own: A Financial Guidebook for Widows, have been featured in The New York Times, Wall Street Journal, Kiplinger’s, AARP Bulletin, U.S. News & World Report, Consumer Reports, Investment News, Bottom Line and many others. The guidebook has received 10 national and international awards.

 To devote more time to writing and speaking, Kathleen closed her practice to new clients some time ago. She was previously named as one of the country’s 100 Great Financial Planners by Mutual Funds Magazine.

 Please be our guest for this educational and enlightening workshop!

 This event is a sponsored gift to the community from
 Jane M. Young, CFP with Pinnacle Financial Concepts, Inc.
   

 (719)260-9800

www.MoneyWiseWidow.com

 
   
 

Learn More About Long Term Care Insurance at Our Next Fireside Chat on July 11th

Please join us for lunch, at Pinnacle, for our next Fireside Chat on July 11th at 11:30.  We will discuss Long Term Care Insurance.  As always this is purely educational and free of charge.  Please call Judy at 719-260-9800 to RSVP.  Please let us know if there are any topics that you would like us to discuss at future Fireside Chats.

1 2 3 4 5