We continually hear that women are statistically likely to live longer than men. The CDC reports that the average life expectancy for males is 74.8 years and 80.2 years for women.
If you have already reached age 65, the numbers go up to 84 and 87 years, respectively. If you are a woman, you may be wondering if your financial plan should look differently than a man’s. Or, if you are a couple, how do you effectively plan for both spouses? While there is not a one size fits all financial plan, there are a few things you can think about.
Keeping up with Inflation
When you are working and saving money, it is important to take enough risk with your investments to outpace inflation. Even if you are more conservative about your investment approach, not taking any risk in your portfolio can be the same as losing money, because your dollars buy less and less overtime. It is important to talk with your advisor about how much risk you need to keep ahead of inflation. If we women truly have a longer life expectancy, it may be worth being a little more aggressive in our investing.
Providing for Both Spouses
If you are part of a couple, there could be a pension or income stream that is only distributed to one spouse. It may be wise to consider adding the joint life option when you are making your pension selections so that both spouses are provided for if the spouse that owns the pension dies first. With this option, the amount of money received each month may be less, but the ongoing distributions can be invaluable in the event of an early death. Another option to provide for a spouse is life insurance. Keep in mind that if both spouses are receiving social security income, the amount will be decreased when one spouse dies.
Know your Team
We often see one spouse in a couple take the responsibility for handling the finances while the other spouse is hands off. It is important that both spouses have a relationship with their financial advisor, tax professional, and any other members of the team. It can be stressful to lose your spouse and then have to form new relationships with the team at the same time. Both spouses need to know the team, so either of you are ready if your spouse predeceases you.
Set your Estate Plan
Having a solid estate plan is important no matter what your age or gender. We help clients find an attorney to make sure they have an up-to-date will. Some people will also choose to create a revocable living trust. Other necessary items are power of attorney documents for both financial and healthcare. These documents help ensure your assets go where you want and determine who will make decisions if you are no longer able.
Be Mindful of the Widow’s Tax Penalty
A married couple benefits from tax reductions when they file jointly. They are allowed a higher income in different tax brackets. For example, a married couple filing jointly can have income of $23,201 to $92,300 in the 12% bracket. A single person in the 12% bracket can only have income of $11,601 to $47,150. This can be a surprise to widows if they are used to having a specific tax bracket. It’s important to be prepared for the tax changes to your financial plan if a spouse dies.
The important thing in all of this is that no matter what your age, gender, or tax bracket, you should have a solid financial plan in place with a trusted advisor who is there to guide and give you the best possible advice. If we as women do end up living longer, let’s be prepared for it! At Foster Group, we take a more complete picture of wealth by getting to know our clients and understanding what drives them.
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