All the Single Ladies

According to a McKinsey study, single ladies will hold $30 Trillion dollars in assets by 2030 and most of them will be widows.?That’s a lot of money – almost as much as the current U.S. debt.?Surveys also tell us that single women are very concerned about long-term planning, specifically retirement planning, long-term care and insurance.?How can financial professionals help these women???And not only capture these assets. but retain them through the generational wealth transfer?

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To better understand what today’s women face, let’s look at two women from two separate generations that illustrate how retirement has changed and the challenges those changes have precipitated.

My mom, a member of the Silent Generation, is going to celebrate her 94th birthday next month.?When dad died 9 years ago, my mom was left with Social Security, two pensions, employer paid medical insurance, proceeds from my dad’s life insurance and a healthy savings account, mostly because she never had to dip into it.?Even if she lives past 100, she’ll be financially secure.???

Now let’s consider Pam, a Baby Boomer at age 62 and in good health.?Her husband, Bill, is three years older and they want to retire now because Bill has a couple of chronic conditions that are making it difficult for him to work.?They don’t have pensions, must pay for their medical insurance premiums and other healthcare expenses, and must rely on Social Security and their savings to generate a retirement paycheck.?Understandably, Pam is worried about what will happen to her when Bill dies.

When Pam and her husband asked their advisor for an income plan, he did what most advisors do.?He went through a traditional fact-finding session with them, concentrating on their cash flow needs, legacy goals and risk tolerance.?He then ran a plan that assumed Pam and Bill would both live to age 95, gave them a monthly income amount (or percentage) they could reasonably withdraw from their investment portfolio, had them both delay claiming Social Security to age 70, and gave them a “probability of success” based on Monte Carlo testing. ?

Do you think that advisor addressed Pam’s concerns??Of course, he didn’t.?I suspect this is why studies show that as much as 80% of widows leave their advisors within a year of their spouse’s death.?

What should that advisor have done to address Pam’s concerns??Instead of concentrating on the scientific side of planning, he should have first asked about their individual concerns about retirement.?Bill probably would have talked about his health conditions and Pam about her worries about her financial security should Bill predecease her.?This conversation would have presented the advisor with the opportunity to talk about the “Longevity Gap”.?

What is the “Longevity Gap”??On average, married women in the U.S. are 2 years younger than their husbands and, if over 65, live 2 years longer than their husbands.?When we add in health issues, that gap widens even further.?The advisor could point out, as an example, that a 55-year-old woman married to a 57-year-old man can expect to live an additional: ?

-?????????4?years if he has high blood pressure,

-?????????7 years if he has heart disease,

-?????????11 years if he smokes, and

-?????????14 years if he has Type 2 Diabetes.???

These are not easy conversations to have but many advisors make the mistake of assuming because these are uncomfortable conversations for them, they will be for the client.?That couldn’t be further from the truth.?According to the New York Life Foundation’s Dec 2022 “State of Grief” report, 68% of Americans want a more open dialogue around death and loss after COVID.?

If that advisor had access to personalized longevity projections, and those projections were dynamically integrated into his software showing how they impacted Social Security claiming strategies and healthcare and LTC expenses, on Pam and Bill’s years together, as well as Pam’s years as a widow, would he have addressed Pam’s concerns??Yes, and it would be a much better plan for them both.

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So, what can we learn from these two women?

1.???Retirement has changed drastically, and advisors need to change the way they approach retirement income planning with their clients.?People don’t want probabilities of success based on ‘rules of thumb’.?Couples want a plan that will clearly show them the widow will be okay after her husband passes.?

2.???We need to do a better job of engaging women in the long-term planning process.?UBS Global Management’s “2019 Investor Watch Report” found that only 23% of women take the lead in planning discussions with their advisors.?Women will be more engaged if advisors make the effort to understand their individual concerns, talk about them openly, and address them in the plan.?

3.???Our industry can no longer afford to avoid #longevity planning.?In fact, the CFP curriculum recently introduced a 7th step into their Ethics Curriculum to focus on longevity.?Ethics is not an elective – it’s mandatory and longevity is now part of the fiduciary standard.

4.???Incorporating reliable, personalized longevity data into the advisor’s retirement income planning process and technology leads to much better planning, much higher retention and gives peace of mind to clients, especially widows.

We would want nothing less for our moms or ourselves.?

#widows #retirementplanning #retirementincomeplanning #longevityplanning