Single Women, Be Savvy About Your Finances
October 10, 2014
Single Americans make up more than half of the adult population for the first time since the government began compiling such statistics in 1976. In the past few decades, there’s also been a dramatic jump in the average age women get married — from around 22 to around 27.
This rise in singleness has enormous implications for our economy, politics and society in general, but the shift may be most seismic for women themselves. Therefore, I’d like to offer some financial advice specifically to all the single ladies.
Life’s expensive and women live longer
Start saving now. That’s good advice for just about everyone. But for women, it’s even more crucial because women live longer and, on average, make less over their lifetimes. Women are more likely than men to take time out of the workforce — and therefore, receive no paychecks — to care for family members and, despite our country’s progress in narrowing the gender wage gap, still make less than men for the same job.
This combination of longevity and lower lifetime income means women are more likely to receive a smaller Social Security check in retirement and outlive their savings. Said acting Social Security Commissioner Carolyn Colvin earlier this year on National Public Radio, “Many women will say they don’t have the ability to save, and what I say is that they cannot afford not to save.”
A few suggestions for socking more away: take full advantage of employee 401(k) matches (otherwise you’re leaving free money for retirement on the table), consider putting the new extra income from a raise straight into a retirement account (you lived on the old income before, so just pretend nothing’s changed), think about saving 15 percent of your income instead of the oft-advised 10 percent and purchase nonessentials (such as pumpkin spice lattes, designer purses and cute shoes) only after you’ve paid your bills and contributed to your savings. Over time, those little extravagances add up to big bucks.
Long-term care could be longer term
Women’s longer lifespans affects their long-term care planning, too.
Singles are more likely in general to need long-term care because they have no spouse to turn to for care; and their longevity means women are more likely to need long-term care for more years. It’s a double whammy, and what a whammy it is: According to the insurer Genworth, the median rate for a private nursing home room in Tennessee is $198 a day or $72,088 a year. So if you’re considering long-term care insurance, start early — late 40s or early 50s — because the odds of being declined increase with age, and women’s premiums are higher than men’s.
Life insurance isn’t just for married with children
For starters, singles share the same “end-of-life expenses” such as debt, mortgages and funeral costs as married couples and a policy payout will help your loved ones take care of those.
Secondly, life insurance can be a great way to leave a tax-free legacy to your nieces, nephews, a favorite charity or anyone else you choose.
And thirdly, you may not always be single — or childless. Purchasing insurance when you’re young and healthy makes it cheaper and eliminates the risk that your health will render you uninsurable down the line. Should you ever marry, you’ll already have a policy to protect your spouse and children that you may have. And should you have children as a single parent, you’ll not belong to the nearly 70 percent of single parents with children at home who have no life insurance policy (according to research by the University of Virginia Darden School of Business and Genworth).
Divorce might make you single
While the overall divorce rate has dropped, it’s doubled since 1990 for people over age 50. Moreover, according to a survey conducted a few years ago by AARP, more women than men are initiating mid- and late-life divorces.
Divorces are financially destructive. Besides the legal costs of the divorce, there’s the impact of divvying up assets (perhaps shortly before retirement) and the possibility that one partner — typically the woman — was unemployed and now has no income and no savings.
Furthermore, many women opt to keep the family home, an asset that sometimes becomes more of a financial burden than a benefit. Planning and saving today can protect you from unforeseen financial calamity tomorrow.
For investment strategies that fit your single status and specific goals, talk to a financial advisor.
