Plan for Divorce, Widowhood

(Page 2 of 2 of Personal Finance for Women)

Depending on which statistics you read, approximately 50% of couples divorce and the average age of widowhood is 56. If you are part of a couple, you need to prepare for life without your partner.

Know your finances. Do not wait until you are a widow or in the middle of a divorce to figure out what you have, what you owe, and where everything is.

Establish a credit history in your own name. Establish credit accounts and loans jointly, or open some individual accounts in your own name. If you divorce and start using your maiden name again, and you and your husband had a good credit rating, notify creditors and the three national credit reporting agencies (Equifax, at, Experian, at, and Transunion, at of the change.

Check your credit reports each year for mistakes or unusual activity; you're entitled to a free one from each credit reporting agency every 12 months. (To learn more about credit reports, how to get them, and how to establish good credit, read Nolo's article Credit Scoring.)

Make sure assets are in your name, too. Your home, investments, and other assets should be in both names. This is particularly important if you don't live in a community property state, or if there might be a question about whose money purchased the asset. (To learn more about division of assets in a divorce, read Nolo's article Dividing Property and Debt During Divorce FAQ.)

Know what policies and accounts name you as beneficiary. This would include, among other things, life insurance policies and retirement accounts. Not knowing who to notify if your mate dies could mean losing out on significant income or benefits.

Discuss life insurance. An adequate policy could allow you to keep your home and maintain your lifestyle if your partner dies. A "term" life insurance policy (one that provides protection for a specified period of time -- say, ten years) can provide a lot of coverage for a relatively low premium -- if it is purchased while the insured is still relatively young and healthy. (To learn more about life insurance, including how much you need, see Nolo's Life Insurance area.)

Create an emergency fund. Some experts advise women to put away some cash in their name only -- enough to last you at least three to six months in a pinch. Whether or not you let your partner know about it is up to you.

Remain employable. Women who become divorced or widowed often have to reenter the workforce, but their prospects and income may be limited if they don't have marketable skills and experience. To remain employable, keep up with advances in workplace technology. And consider working part-time, even if you don't have to.

As uncomfortable as it may be to think about divorce or the death of a mate while you are still happily joined, doing so can help you avoid a dramatic change in lifestyle after your partner is gone.

Plan for Longevity

On average, women outlive men by six to eight years, and many women live decades longer than their mate. But rather than planning for longer life, many women are not saving enough. According to a recent study, women invest more conservatively, start saving later, are more likely to be in and out of the workforce, and on average earn less than men -- all factors that reduce retirement income.

To avoid outliving their money, women must manage their finances with a longer life expectancy and perhaps lower earnings in mind.

Establish Your Own Retirement Plan

Even if you have a partner who assures you that he or she is saving enough for both of you, implement your own retirement plan. Depending on your employment situation, do one or more of the following:

  • Invest earlier. Start investing as soon as you can. If you begin investing just two years earlier, you will increase your nest egg by 18%.
  • Max out contributions to an employer-sponsored retirement plan, such as a 401(k). At the very least, invest more than you currently do.
  • Don't cash out your 401(k) when you leave a job. Doing so forfeits 20% or more of the account's value in taxes and another 10% in an early withdrawal fee.
  • Establish a Keogh, solo 401(k), or SEP IRA if you are self-employed. Contribute to a traditional or Roth IRA, if you qualify. Establish a spousal IRA if you do not have earned income and meet other qualifications.
  • Take advantage of catch-up provisions that allow you to save more than the usual maximum if you are age 50 or older.
  • Delay retirement. Working two more years can increase projected retirement income by 135%.

Consult a financial advisor for help choosing the best retirement plan for your situation.

Invest Appropriately

Some experts assert that women are naturally more averse to risk than men. That works both for them and against them: Once women get comfortable with investing, they can become excellent investors because they are meticulous about their research. On the other hand, women sometimes avoid putting money in the more aggressive investments that would produce the higher returns they need to build a nest egg that lasts their longer lifetime.

Savings accounts, CDs, bonds, and other fixed-income investments aren't likely to provide enough growth to keep you out of poverty in your old age. If, even after reading and learning about investing, you still don't feel you can make the more aggressive investment choices on your own, consult a financial planner. (To learn more about the basics of retirement investing, read Nolo's article How to Invest Wisely for Retirement.)

To learn how to choose the right retirement investments, get Nolo's eGuide Investing for Retirement: Make Good Choices Without a Ph.D in Finance, by Ralph Warner.

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