Submitted by Tim Whisler, CRPC®, CLTC®, Certified Financial Fiduciary®, President of The Whisler Agency, Morton IL.
As we know, life happens without our permission all the time. Unfortunately, these life events can be expensive when there is no plan. Because we do not know when the journey of life will take us down a different path, it is important to plan for that unexpected detour. When women experience divorce or the death of a spouse, the financial impact can be severe while also creating tremendous anxiety.
In nearly 20 years of serving clients with retirement income planning, I have conducted a plethora of conversations with ladies who have experienced such a detour. Women often face unique challenges such as lower pay, fewer work years, and longer life expectancy. The combination of these challenges makes it crucial for there to be a retirement savings plan.
The gender pay gap shows that on average, women earn 82 cents for every dollar earned by men.1 Over time, this adds up and can significantly impact their retirement savings. Women tend to take more time off than men to raise children or to care for elderly parents. This naturally results in fewer working years to save for retirement by missing out on employer contributions and other retirement benefits. Women have a longer life expectancy than men, which means they need more retirement savings to cover their living expenses. Therefore, women are more likely to live alone in retirement, increasing the need for financial security.
Just about a year ago, I experienced one of the most heart-wrenching conversations I’ve ever had. The husband had been battling cancer for a few months and with the hopes that he would survive, they wanted to review their financials. He was the primary breadwinner earning six figures a year, had a little over a year’s salary in a 401k, and a group life insurance policy worth nearly two years’ salary. She was a homemaker taking care of kids at home with the youngest being in 6th grade. Only a few months later, he lost his battle with cancer. The amount she received from his 401k and the life insurance policy would only provide income for just a few years. Because of this, she was forced to seek full-time employment not only for income but also for health benefits. Her life took this disastrous turn at 41 years old.
Going through a divorce or experiencing the death of a spouse can be a difficult and emotional time for anyone. However, women often face financial challenges because of these events. Due to traditional roles, many women have less experience in making big-picture financial decisions, which can make it extremely difficult to navigate the financial aftermath of a divorce or the loss of a spouse.
Should such an event occur, the first thing to know is to avoid making any major financial decisions during this time of adjustment. Dealing with the emotional burden can alter the ability to think logically, especially about a topic that feels like a foreign language. Interview financial professionals until you find someone qualified and competent to provide guidance, support, and education during this transition. Having a loved one participate in these conversations is certainly advisable. The process will include but is not limited to understanding the role of a budget and maximizing sources of income such as retirement accounts, spousal support, Social Security benefits, and pension income. When I am asked to help a divorcee or a widow to begin navigating this new and unexplored journey, I encourage her to have patience and allow time for understanding because everyone learns at different paces. With careful planning and the right support, women can take control of their finances and ensure a secure financial future following a divorce or the death of a spouse.
To learn more about Tim and The Whisler Agency, go to www.thewhisleragency.com. Click on Podcast to be directed to the “Whisler While You Retire” podcast. Be sure to subscribe to be notified when new episodes are available. You can reach Tim at (309) 291-0491 or by email at tim@thewhisleragency.com.
Investment advisory and financial planning services are offered through Simplicity Wealth, LLC, an SEC Registered Investment Advisor. Sub-advisory services are provided by Simplicity Solutions, LLC, an SEC Registered Investment Advisor. Insurance, Consulting, and Education services are offered through The Whisler Agency. The Whisler Agency is a separate and unaffiliated entity from Simplicity Wealth and Simplicity Solutions.
1 https://www.pewresearch.org/fact-tank/2023/03/01/gender-pay-gap-facts/