What Every Woman Should Do Now to Protect Her Financial Future
By Mary Hunt
Becoming a grandparent four years ago turned my world upside down. Suddenly, I wanted to buy this little boy everything his little heart would ever desire. I was ready to prepay his college tuition, pay for his first car and his first home, too. I went a little nuts. Thankfully, I came to my senses quickly, recognizing anew that the best gift I can give my kids and grandkids is to make certain I am taking care of myself first before taking care of anyone else.
Women are most vulnerable to poverty in retirement because they live longer and earn less over the course of their lives. Plus, things happen in life that we simply cannot prevent: Two-thirds of women in retirement are single. The divorce rate among people age 50+ has doubled over the past two decades.
You can’t cheat death, accidents happen, and not all jobs and marriages last. But you can arm yourself with knowledge and plan financially for your future, whatever it may hold.
Here are five steps you can take to prepare for the unexpected:
- Maintain good records. Retain copies of all current assets, bank account numbers, safe deposit information, insurance beneficiary information, IRAs and other retirement-account records, tax returns going back seven years, mutual funds statements, stocks and bonds, health insurance policies, home owner’s and auto insurance policies, the lease or mortgage information for your home, wills, trusts, powers of attorney, and birth and marriage certificates. It is also a good idea to keep receipts of major appliances and warranty documentation.
- Have your name on all bank accounts. If your spouse dies suddenly, it could be very difficult to keep everything current if the account is in one name only. Each of you should also have a savings account in your own name, just in case a will is contested or some other complication arises. This account should hold just enough money to pay essential living expenses for a month or so.
- Manage your credit. Good credit is essential to any sort of financial independence. Get credit in your own name through a personal credit card. Without good credit, it will be nearly impossible for you to borrow money to purchase a home or car or to even get a credit card without assistance. A growing number of companies check credit reports before making hiring decisions. Landlords want to see a clean credit report before deciding who gets the apartment. The practice is called “risk-based pricing,” and it is perfectly legal.
- Create wills for yourself and your spouse or partner. Keep the notarized original, give your lawyer a copy, and put a copy in your safe deposit box. Review and update your will every five years or when you acquire significant new assets. While state laws vary, surviving wives usually inherit at least half of their husband’s estate. However, given the nature of the modern family, inheritance can be contested by stepchildren, children, siblings, and even cousins. It is very important to state clearly whom you want to receive your property and possessions.
- Save, save, save! One reason for the high rate of poverty among older women (1 in 10 women age 65+ lives on less than $10,289 per year) is the lack of personal savings. Many people are unaware that every spouse, with or without income, can open a Spousal Roth IRA. The only requirement is that one spouse earns enough income to cover the contribution. As long as your spouse earns $11,000 in income, he/she can put $5,500 into his/her Roth IRA and $5,500 into yours (or $6,500, if either of you is over age 50 and earns at least $13,000).
Following these steps can make the difference between spending your retirement years in financial hardship and enjoying the best your later years have to offer.
Click here to watch a video of Mary discussing how to Debt-Proof Your Christmas with TODAY (NBC) financial editor Jean Chatsky, Kathie Lee Gifford, and Hoda Kotb.
Mary Hunt is the founder of Debt-Proof Living, a syndicated financial columnist, and the author of The Smart Woman’s Guide to Planning for Retirement and Debt-Proof Your Christmas.
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