Single women – those who have never married, those who have experienced divorce, and those who have outlived a spouse – need to take a more proactive approach to growing and protecting their finances, according to a new study.

The Single Women and Money Study found that while the overwhelming majority of single women (97%) believe it is important to be engaged in managing their money, three factors were holding them back from taking action:

1) underestimating their knowledge and experience,
2) neglecting to plan ahead for their financial future, and
3) saving too heavily in cash.

Money causes stress and worry

Women have more financial earning and decision-making power today than in the past, yet, many limit the benefits of that power by shying away from taking control of their financial futures.

More women are choosing to remain single and others take on that sole financial responsibility through divorce or outliving a spouse. The study shows that it is critical that women be actively involved and invested in the financial choices that can allow them to make smart choices.

Single women are less likely to consider themselves knowledgeable than other demographic groups when it comes to saving for retirement, creating a financial plan and investing. This perception may be holding some women back from taking the necessary steps to secure their desired financial future.

While most single women associate their finances with positive sentiments like security, peace of mind and being in control, some also see their finances as a cause for stress and worry, more so than their male counterparts.

Single women were the least likely (28%) to have a comprehensive financial plan in place to help them set savings goals and navigate paying down debt. And, while they worry about unexpected financial hurdles, nearly half (47%) have not put an emergency fund in place to cover three-to-six months of essential expenses.

Single women are also likely not to have other long-term financial protections in place that can be critical in times of necessity. Women who have never married are the least likely to have a number of key safeguards in place, compared to those who have had a partner at some point. But many said they wanted to become better prepared, with more than half saying they need to spend more time on their finances or admitting they don’t spend any time managing their finances at all.

Best practices for women

Make it a priority early to establish strong financial habits. Here is a short list of best practices to get you started:
• Get into the driver’s seat: know what you own, how much you owe, and what your goals are for your money to ensure that your investments are working toward your future.
• Put financial safeguards into place, including a holistic financial plan that is based on your individual situation and goals.
• Know that your investments suited toward your tolerance for risk, and time horizon to save.
• Make it a priority to check-in on your finances at least annually.

Widows share wisdom

Widowed women are more likely than any other group surveyed to say they feel confident about their finances and in control of their money. This positive financial outlook may be connected to early planning. About 65% of widows say they had a financial plan in place prior to losing their spouse, and 80% of those women had worked together with their partner to build that plan.

• Know where all important financial and healthcare information can be found
• Have a will and other estate documents in place
• Make sure beneficiaries are correct and current for all accounts
• Make sure both names are on mortgages, insurance policies, and other accounts
• Don’t delegate financial planning – make sure that you work together

Divorced women more financially free, in control

Major life events can often be a catalyst for action with our finances. Among divorced women, the large majority said they feel more in control of their finances after their divorced (84%) and have more financial freedom than when they were married (76%). Two thirds said they are in better financial shape today, although nearly half (45%) report they have had to cut back their spending to save post-divorce. One quarter applied for or started a new job, and 18% improved their earnings prospects by working toward a new educational degree.

For some, feeling more financially savvy came immediately. For others, this took time: one third divorce said that it took more than a year after divorce to feel financially grounded; roughly 25% said they still don’t feel secure.

When asked what financial choices they would have made differently in their marriage, divorced singles said they wish they had saved more and better educated themselves about how to invest for the long term.

Results of the survey were based on an online omnibus conducted among a demographically representative U.S. sample of 2,260 adults comprising 1,503 single women (including never married, divorced, and widowed), 250 single men, 251 married women and 256 married men 18 years of age and older. The survey funded by Fidelity was completed during the period May 16-23, 2017 by MarketVision Research, an independent research firm.

For those courageous enough to remarry, there are many financial questions to answer together. How will you combine finances? This issue gets thornier the older you are. You’ll want to create a financial strategy that considers the assets, liabilities, and financial responsibilities that each partner brings to the marriage. Financial planning for remarriage is more complicated than it was the first time you got married, because your life likely isn’t as simple now. You may have acquired more assets. You may have children. You may want to plan more carefully this time, now that you’re familiar with the financial consequences of divorce or the death of a spouse. You may be more focused on retirement than you were the first time.

Many of the basic issues are no different than for those marrying for the first time: budgeting, savings and investments, insurance and risk, tax planning, integrating your employee and retirement benefits, and property ownership.

Ensure a healthy future financial relationship

Before getting married, have an honest talk about your finances

You and your partner should discuss how you will handle money together, well before the wedding. Differences in how you and your partner handle and think about money can hurt the process unless you can communicate those differences. One person may be a saver, the other a spender. Also, you may have different financial goals than your partner. Money issues can be especially troublesome when you remarry, because you may feel financially vulnerable if a previous marriage ended in divorce, particularly if it ended, all or in part, because of financial troubles.

You can together work out the terms of your financial relationship, setting up a mutually agreeable plan. Before marriage is the time to decide if you want to keep separate bank accounts and to decide whether you want to pay expenses together or separately. Consider disclosing all your obligations and income to your partner to avoid any misunderstandings in the future and so that you can make sure that any budget you set is realistic.

Consider using legal agreements

Prenuptial and postnuptial agreements are contracts used by couples of all ages to define their rights, duties, and obligations during marriage and to determine what happens in the event the couple separates or divorces or one partner dies. If the contract is written prior to the marriage, it’s called a prenuptial, premarital, or antemarital agreement. (If it’s written during the marriage, then it’s called a postmarital agreement.) Couples who are remarrying should consider using marital agreements if they have substantial assets or children to protect and/or want to avoid some of the financial trauma that could occur if their marriage ends. They can spell out what assets and liabilities each partner is bringing into the marriage and determine how the assets brought into the marriage, and those acquired during the marriage, will be divided. These issues may also have an impact on your estate planning.

Consider keeping credit separate

One way to help you and your future spouse maintain a good financial relationship is to continue keeping your credit separate even after you marry. Instead of applying for joint credit cards, each partner can keep his or her own credit cards. This can protect you in several ways. If one of you has good credit but the other doesn’t, it can help the partner with good credit keep it. Keeping credit separate will also make it likely that if this marriage ends in divorce, only the person who incurred the obligation will have to pay it. In short, you won’t end up paying your ex-spouse’s debts. If you or your partner have been burned financially in a relationship before, keeping separate credit might make you feel more at ease and may prevent arguments.

The downside to keeping separate credit is that it can be complicated. If one spouse is working while another isn’t, the nonworking spouse may have trouble qualifying for his or her own credit. Trust issues and arguments over credit may also arise should one spouse have more credit or more accounts than another. In addition, you and your spouse may be able to qualify for a credit card or a loan much more easily if you apply together rather than separately, so keeping your credit completely separate may not be smart or even feasible.

Who owns what

There are several ways ownership of assets can be titled. Couples who are remarrying should pay close attention to the way assets acquired after they marry are titled, because how their assets are owned may affect their current finances as well as determine who will receive the assets after they die.
For example, if you and your partner buy a car and sign the loan paperwork together, you own the car jointly (as joint tenants). Owning your car this way can be advantageous because it means that if one of you dies, ownership of the car will pass immediately to the other. However, joint ownership can also have certain disadvantages. For example, if your partner owes back child support, his or her ex-spouse may be able to claim that the car should be sold and the money used to pay back child support, and the court may order this. Or, if your spouse owes money to a creditor, the creditor may be able to place a lien on the property or force you to sell it to pay off the debt. The fact that you aren’t responsible for the debt won’t affect the creditor’s right to your spouse’s share of the property.

People remarrying should carefully consider how holding assets can affect their estate planning goals. For example, if you have children from a previous marriage and you want to make sure they receive your assets when you die, consider setting up a trust for the benefit of the children. To make sure that your spouse has access to funds immediately after you die, you may want to set up a joint savings account.

Protecting retirement and pension benefits

Older individuals sometimes hesitate to remarry because they fear losing their Social Security or pension benefits. However, except under certain circumstances, this is usually not the case. For example, if you’re receiving a survivor’s benefit or annuity based on your deceased spouse’s pension, you generally won’t lose it if you remarry. One exception that can occur: If you are receiving survivor’s benefits based on your deceased spouse’s service with the federal government or the military, you do face the likelihood of losing your benefits in that situation if you remarry before age 55.

Rules governing Social Security survivor’s benefits are a little different. If you are over age 60 and are receiving survivor’s benefits based on your deceased spouse’s Social Security record, you won’t lose those benefits if you remarry. However, if you’re under age 60 and are receiving benefits because you are caring for a dependent child, you will lose your survivor’s benefits if you remarry.

What if you underreport income or exaggerate expenses?

Because you sign the financial affidavit under oath, deliberately falsifying your financial information is perjury. Additionally, if your divorce ends up in trial, your credibility as a witness would be undermined if your spouse’s attorney can prove that you lied in your affidavit. This, of course, may sway the court’s sympathy toward your spouse. And finally, even if your case never makes it to trial, your spouse may be able to force a property settlement in his or her favor if you gave false information in a court document.

An example: John handled the finances in his family and secretly stashed away $50,000 in a bank account during the last years of his marriage. When divorce proceedings began, he wire-transferred the money to his mother, a resident of Colombia. John’s wife Mary learned of the money when she found a receipt for the wire transfer in a coat pocket. Since John had not disclosed the existence of this money in the discovery phase or in his financial affidavit submitted to the court, Mary was able to use this fraudulent transfer to force a more favorable settlement.

Important documents

It’s not uncommon for spouses to be less than truthful when completing their financial statements. If you suspect that your spouse has not disclosed some assets, there are a number of places where you or your attorney can look for these hidden assets. These documents are important:

• Personal income tax returns
• Partnership and corporate tax returns
• Pay stubs
• Savings account statements
• Canceled checks, check registers, and bank statements
• Securities and mutual fund statements
• Children’s bank accounts
• Life insurance contracts

However, it’s often the case with married couples that one spouse handles the bills and other financial affairs. So the other spouse may not be well informed. Therefore, it may be difficult for one to determine if the other is being truthful in the affidavit. Fortunately, you and your attorney have opportunities for fact-finding, including hiring a forensic accountant.

Common mistakes on financial affidavits

Sometimes hidden assets aren’t the problem. Frequently, people unintentionally get their expenses wrong because they don’t know how to fill out the affidavit. Some expenses are easy to list – you know your car payments, mortgage payments, and utility payments. But there can be double-counting if your bank pays your property taxes, for example. Other, often smaller, expenses are easy to overlook — how much you pay for pet care, subscriptions, lawn care, school supplies, and other one-off or annual expenses. Because these types of costs can really add up, really think about them when completing your financial affidavit. But don’t overestimate your expenses, because you may have to defend them.

What information is in an affidavit?

The data in a proper financial affidavit includes:

• Your name and address
• Occupation and job title
• Employer’s name and address
• Frequency of your paychecks (i.e., weekly, biweekly, monthly, etc.)
• Monthly gross pay
• Type and amount of payroll deductions
• Net monthly take-home pay
• Other sources (and amounts) of income
• Net monthly income from other sources
• Housing expenses
• Utility expenses (gas, electric, telephone, water and sewer, trash)
• Grocery bill
• Restaurant and entertaining expenses
• Out-of-pocket medical expenses (doctor, dentist, prescriptions)
• Insurance expenses (life, health, disability, auto, homeowner’s)
• Transportation expenses (fuel, repair and maintenance, parking)
• Clothing expenses
• Child-care and child-related expenses
• Personal care and toiletries
• Educational expenses
• Miscellaneous expenses
• Debts of all kinds, including car loans, mortgages, 401(k) loans, student loans, etc. (monthly payment, unpaid balance)

Because divorce is based on state law rather than federal law, each state has its own requirements regarding the financial statement. Nevertheless, the above-listed information is typical. Contact a divorce attorney for more details about your own situation.

How does divorce affect Social Security benefits?

Some people don’t realize that after a divorce, you can choose whether to claim retirement benefits based on your own earnings record or on your ex-spouse’s earnings record. Of course, that’s provided certain requirements are met.

What requirements must be met?

You could qualify to take benefits based on your ex-spouse’s record if you meet all these conditions:

• Your ex is currently entitled to receive Social Security retirement or disability benefits (meaning they were employed and accumulated enough credits over time);
• You and your ex were married for at least 10 years before the divorce became final;
• You are not currently married;
• You are age 62 or older, and
• You aren’t entitled to collect benefits based on your own earnings record that is more than half of your ex-spouse’s benefits.

If you are age 62 or older and you’ve been divorced for at least two years, you can receive Social Security benefits based on your former spouse’s earnings regardless of whether they have started taking benefits. This assumes that the four requirements listed have been satisfied.

How much can you receive?

If you begin receiving benefits at your full retirement age (66 to 67, depending on your year of birth), your spousal benefit is equal to 50% of your ex-spouse’s full retirement benefit (or disability benefit). For example, if your ex-spouse’s benefit at full retirement age is $1,500, then your spousal benefit would be $750. However, there are several factors that may affect how much you ultimately receive.

For example, if you’re eligible for benefits based on your own earnings record then the Social Security Administration (SSA) will pay that amount first. But if you can receive a higher benefit based on your ex-spouse’s record, then you’ll receive a combination of benefits that equals the higher amount.

When you begin receiving benefits will also affect the amount you get. You can start benefits as early as age 62, but your monthly benefit will be reduced (reduction applies whether the benefit is based on your own earnings record or on your ex-spouse’s.) This reduction is permanent. In other words, if you choose to receive reduced benefits at age 62, you will not be entitled to collect full benefits when you reach your full retirement age. If you decide to receive benefits later than your full retirement age, your benefit will increase by 8% for each year you wait past your full retirement age, up until age 70 (increase applies only if benefit is based on your own earnings record).

In addition, if you work after you begin receiving benefits (before you reach your full retirement age) and your earnings exceed the annual earnings limit that applies, your Social Security benefit may be reduced. Receiving a pension based on work not covered by Social Security could also reduce your benefits.

If you decide not to collect retirement benefits until full retirement age, you may be able to maximize your Social Security income by claiming your spousal benefit first. The option to file a restricted application for spousal benefits may be available to you if you were born on January 1, 1954, or earlier. By opting to receive your spousal benefit at full retirement age, you can delay claiming benefits based on your own earnings record (up until age 70) so you can continue to earn delayed retirement credits. This can boost your benefit by as much as 32%. Talk to us before you decide when to begin receiving Social Security benefits because it’s a complicated decision.

Does remarriage affect Social Security benefits?

If your ex-spouse gets remarried and you don’t, your Social Security entitlement will be not be changed. But if you have remarried, you can’t collect benefits based on your ex-spouse’s record (unless your current marriage ends). Any spousal benefits you receive will instead be based on your current spouse’s earnings record.

What if your ex-spouse has died?

You may also qualify for Social Security survivors’ benefits based on your ex-spouse’s earnings record if your former spouse has died. You may qualify if:

• Your ex-spouse was entitled to Social Security benefits;
• You and your ex-spouse had been married to each other for at least 10 years before the divorce was finalized;
• You are age 60 or over (or are between ages 50 and 60 and are disabled);
• You aren’t currently married, and
• You aren’t entitled to a retirement benefit that is equal to or greater than 100 percent of your deceased spouse’s benefit

If you meet those conditions, you will be entitled to full survivors’ benefits; that is, you will collect an amount equal to 100% of your former spouse’s benefits, not just one-half. However, if you’re younger than full retirement age, your benefits will be reduced for each month that you took benefits early. So benefits at age 60 will be 71.5% of your former spouse’s. It’s also important to note that a divorced spouse may be entitled to a benefit if caring for the dependent child (under age 16 or disabled) of his or her deceased former spouse. Typically, the amount of a mother or father’s benefit is equal to 75% of the deceased spouse’s benefit. Unlike a spousal benefit, that benefit isn’t necessary for the marriage to have lasted 10 years.
 

By Matt Carey
Divorce is often traumatic, with a large emotional impact on all parties. And the financial ramifications of dissolving a marriage can be no less devastating. I’ve found that many put the financial considerations last on their list. It’s very easy to want to “get it over with” but many have regrets later. That’s why it is important to bring on professionals who specialize in financially equitable divorce settlements early in the process, to make divorce easier. It increases the probability of a settlement that truly addresses your long-term financial needs.

For many, an attorney is the first — and sometimes only — professional they contact. While the attorney is a specialist in divorce law and an invaluable source of legal counsel, they are typically not financial experts.

Why a CDFA?

I have chosen to help my clients through the CDFA (Certified Divorce Financial Analyst) course of study. A CDFA professional helps clients and their lawyers understand how the financial decisions made today will impact the future; for example, how to split a retirement plan and who gets to keep the house. I help clients make financial sense of proposals, providing data that shows the financial effect far into the future of any given divorce settlement. Many don’t fully understand the long-term tax implications of settlements, or a lawyer doesn’t have time to analyze pension payouts or future earnings capabilities. The question of who gets the house is fraught with emotion, and sometimes people can make a choice that is not right for them.

What’s a QDRO?

Retirement benefits in a divorce are especially critical for women who may have little savings of their own. Under federal law, work retirement plans generally can’t be assigned, but the important exception to this rule is for “qualified domestic relations orders,” commonly known as QDROs. In a divorce, you can get a state court order awarding you all or part of a spouse’s retirement plan, and it becomes your own retirement plan. The plan is required to follow the terms of any order that meets federal QDRO requirements.

For example, you could be awarded part of your spouse’s 401(k) plan benefit as of a certain date or part of your spouse’s pension. But there are several ways to actually divide those benefits, so it’s very important to analyze all options when your attorney is negotiating and drafting QDROs — especially for defined benefit plans. In defined benefit plans, a QDRO may need to address survivor benefits, benefits earned after the divorce, plan subsidies, COLAs, and other complex issues. For example, a QDRO may treat you as the surviving spouse even if your spouse subsequently remarries. The key takeaway here is that these rules exist for your benefit.

Divorce is never easy. But knowing your options from the beginning, before irrevocable decisions are made, can ease the burden.