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A married woman’s guide to risk management

Gerri and Fred had a wonderful marriage and were gradually moving into a retirement they had planned and looked forward to. She had been a writer and editor and he owned a business and was passing the baton to his son-in-law. Fred’s lapses of memory were just a part of getting older. They both had aches and pains they had not had when they were younger, and both chalked up the forgetfulness and occasional missed detail as part of the deal. It was when Gerri saw a monthly brokerage statement that she realized they had a problem.

The Plan Single philosophy includes both partners staying informed about the resources and strategies you are employing together to get where you want to go.

Fred had always been good with investments. He had managed their portfolio to a generous retirement nest egg. But as his memory started to flag, he started forgetting the buys and sells. He lost tens of thousands of dollars before she had his password changed. Things seemed to stabilize for a bit but his cognitive level declined further. He was eventually diagnosed with Alzheimers. Fred got to be too much to handle. Gerri needed to admit him to assisted living. Without insurance, and the losses that accumulated while Fred was declining, what was left of their retirement savings were decimated. She had to sell their house and move into more modest living quarters.

Plan Single means making sure you will be OK whether you stay single, stay married, or are married and end up single once more. Being married can carry some additional risks as well as benefits to your financial life. They can be roughly grouped into keeping in touch with your risks as a couple, understanding the risks to you face individually, and managing the risks of suddenly becoming single again.

The biggest asset an individual and a couple have, is their ability to earn (or in later years, have) an income.  Any change that would negatively impact income, is an important risk to manage.    During the earning years, the risk of not being able to work due to disability is one too often overlooked.  At age 35, the risk of being disabled for more than three months is three and a half times greater than dying. If both partners’ incomes are necessary to maintain the household, both partners need to understand the other’s disability insurance coverage. What changes will be required in the household budget if one or the other of you is ill or injured for more than a few weeks?  In the retirement years, while you may not be relying on income from working, you are relying on your savings, pensions, and other sources.   If you are a couple in or approaching retirement, what plans have you made to address the possibility of expensive long term care that is far more than your regular retirement expenses? In Gerri and Fred’s case, they thought of it too late when Fred could no longer qualify for long term care insurance to cover the gap,and it took a toll on what they had saved.

What about if one spouse passes way?  If anything happened to your partner, would you have enough to make ends meet? Once every couple of years, run through a capital needs analysis: if either of you passed away suddenly, what short term expenses would need to be covered? What are the long-term plans for each of you individually? Would you stay in the same house? Are there sufficient resources to support the lifestyle you envision?  Don’t forget to factor in the impact of higher taxes in retirement for a single person household.  The largest expense in most Canadian’s lifetime is their tax bill.  In retirement, not only does the loss of a spouse result in lost government benefits ( this can be in the neighbourhood of $20,000 per year), and reduced survivor pension income, you lose the ability to pension income split !  This means higher tax expense for the same level of household income.   The result:  on average, widows report a 40% drop in income.

For many people, the ability to have an income that allows you to retire comfortably and remain that way is highly dependent on their investment portfolio.    If all goes well for you both as a couple, are you saving enough to achieve your retirement lifestyle goals? Set some time aside with your partner to work with an advisor to project your needs and calculate whether your joint savings rate will get you there. Are your portfolios balanced properly? What risks may be hidden in an investment account that is leaning too far in the direction of one kind of security, one industry, or even one company? Are your portfolios allocated appropriately when viewed together? And do you both agree on the strategy? It is common for partners to perceive risk differently, so it is important for both to find a common language and understanding and find an allocation that both can be comfortable with.  And, as in Gerri and Fred’s case, it is important to do periodic check-ins to make sure things are running along as they agreed. An advisor can also be a great resource to monitor the portfolio.

Managing risk as a couple means staying informed. You and your partner may divide up the household duties, including who manages what part of the finances. The Plan Single philosophy includes both partners staying informed about the resources and strategies you are employing together to get where you want to go. It also means making sure both people in a marriage will be Ok if anything happens to either one. For many women, that means keeping in touch with their partner’s risk management program as well as keeping in touch with the combined finances.

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