LifeHealth.com
Emerging Markets: Helping single women retire with confidence
by Sandra Timmermann
Sandra Timmermann, Ed.D., is Director of the MetLife Mature Market Institute in Westport, Ct. She can be reached at stimmerman@metlife.com.
Single women face a unique set of challenges when it comes to planning for retirement. Many don't have the "buffer" of another income and may find themselves behind on retirement savings. With retirement planning on the mind of every Boomer, financial advisors have a unique opportunity to help single women plan for, and live in, retirement with confidence.
The attitudes, goals and challenges that single women face when planning for retirement were underscored by a recent MetLife Mature Market Institute study, which found that an individual's family situation (e.g., marital status) had an influence on the many facets of retirement planning. The Family Matters Study examined the perspectives of three specific mid-life demographic segments: traditional families (families with two parents and children only from their current relationship), blended families (families with two parents and at least one child from a previous relationship) and single women (widowed, divorced or never-married women with or without children).
For advisors, the key is to help women understand their options, which enables them to make confident, informed decisions.
Based on the survey responses, single women are consistently less confident than the other two groups in their ability to secure a comfortable retirement. Only 40 percent of single women said they feel at least somewhat prepared for retirement, compared to 66 percent of traditional families and 56 percent of blended families. Additionally, nearly two-thirds of single women (62 percent) noted that it is more difficult for them to save for retirement than it is for their friends in different family situations.
To overcome these obstacles, single women are more likely than other demographics to need and value objective counsel from a financial advisor. The primary goal for advisors working with single women should be to help them build confidence around retirement planning. Often, this begins with taking time to explore their personal lifestyle goals and to explain how various products can meet their needs as they transition to retirement.
Additionally, advisors should consider the specific situations that single women may face in retirement. Among the tips that advisors might offer single women:
- Know your client's risk tolerance, and help her to feel comfortable with, and confident in, her level of risk. Since a single woman does not have a spouse with a second income, it's critical for advisors to understand these clients' risk tolerance. A good way to help determine risk tolerance is to offer the client several scenarios, each with a different level of risk. Identify the scenario with which she is most comfortable.
- Consider establishing a living trust for your client to protect assets that are designated for her children. A trust will prevent an ex- or future spouse from having access to the assets. Trusts can be established for many purposes. Some examples include child support, education, special needs and medical purposes. This is especially important for single women with a low risk tolerance who are the sole providers for their children. This will give them the comfort that their children will be financially cared for in the future.
- Educate your client about prenuptial agreements and ensure that she has the tools to obtain one if she does decide to marry or remarry. This may also help to protect her hard earned assets for both her children and herself should anything change in the future.
- Help you client prepare for a longer retirement with long term care insurance. A 65 year old woman today will, on average, live another 20 years. And single women living alone in their later years may require outside assistance with everyday activities. Ensure that she is familiar with her options for long term care insurance to protect her financially in the event of chronic illness or injury.
Of course, there will be other factors for financial advisors to consider, determined by the client's age and life circumstances. Among single women, age is often an important variable in retirement readiness. According to another recent study by the MetLife Mature Market Institute, It's Not Your Mother's Retirement: The MetLife Study of Women and Generational Differences, younger women are entering retirement with considerably higher levels of debt than their mothers' generation; many will have to make significant financial adjustments just to stay afloat. Younger women also have different expectations for retirement, including being more active than their mothers and working longer. All of these are important factors for advisors to consider when developing customized retirement plans.
Such plans can help single women maximize their retirement income and make the most of what they have, regardless of age, risk tolerance, liquidity and other financial issues. For advisors, the key is to help women understand their options, which enables them to make confident, informed decisions. Children, grandchildren, estate planning, prenuptial agreements, guardianship: each of these factors has a potential impact on the retirement planning process. Advisors who take a holistic approach to retirement, factoring in each client's unique financial, personal and family concerns, are likely to achieve the best results for their single female clients. They are also likely to earn strong client loyalty by helping single women transition into retirement with confidence and security.