Do women really need a unique financial plan?

Do women really need a unique financial plan? The bottom line is that everyone needs a unique financial plan. Whether you are a spender or a saver, in order to own your financial freedom you need a unique financial plan that takes into account your unique

Living longer on less

Statistics tell us that generally women have a tendency to live longer than men. This means that we need to have more capital to provide us with an inflation beating income for longer. However there are a number of factors that result in women actually saving less towards their retirement than men. These include earning lower salaries and taking time off to raise a family. These are unique challenges faced by women. How do you make sure your financial plan is robust enough to withstand these additional pressures:

• Preserve your retirement fund benefits if you leave your employer. Whether your change in employment is due to a step up the career ladder or the decision to be a home executive, make sure that if you change employment your retirement benefits are preserved. Your financial adviser will be able to guide you through the process and give you the best advice on the tax implications and the best savings vehicle for your situation. But don’t be tempted to use your retirement fund to float your household income so that you can afford to stay home. Put a savings plan in place when you start to plan your family to enable you to make decisions without compromising your retirement.
• Stay at home Moms also need retirement plans, make a sacrifice now and pay yourself first.

Me, myself and I

Make sure that you discuss disability cover and critical illness cover with your financial adviser. Women make up only 31% of Liberty’s policyholders with income disability benefits, compared to 68.6% which are men.[1] If you are disabled and unable to continue working either temporarily or permanently, knowing that you have cover that will replace your income will relieve at least some of the burden.

In 2012, Liberty received 35% of their critical illness claims from women. Of the 403 cancer claims, 81 of them were for breast cancer. Critical illness cover is vital for any women, whether you are a career woman or stay at home mom. Often stay at home moms don’t realise the impact that being diagnosed with a critical illness could have on the family, especially from a financial perspective. Who would step into your shoes if you were not able to do the school run, the homework and manage the day to day activities and home? Recruiting someone to assist can relieve the burden, but it comes at a price. One that needs to be paid on top of increased medical bills. Knowing that you have cover that will ease the financial implications of a critical illness, could go a long way to peace of mind in such circumstances.

Diamonds are a girl’s best friend...

Is finding a husband your financial plan? Many women rely on their husbands / partners for financial security. This can be very dangerous as life can change in an instant and you may suddenly be faced with financial responsibility. Grieving for your husband while trying to arrange with your bank not to foreclose on your home loan which hasn’t been paid, or realising that your joint bank account has been frozen, is something no one wants to face. Make sure that you have a good understanding of your financial affairs and most importantly have your own bank account. In the event of your spouse passing away, his account will be frozen and you will not be able to access the funds, until an executor is appointed and they agree to release funds as they deem appropriate. This could take a while. Make sure that you have 3 – 6 months living expenses in a bank account in your own name.

Make sure that you are comfortable with the legal status of your marriage. Understand your antenuptial contract and what rights and obligations it affords you. If you are married in community of property do you know that you and your spouse are jointly and severally liable for any debts incurred, as well as the fact that you own all assets together? If you are not married and have a so called “common law” spouse, do you know where you stand financially if you separate?

Money can’t buy love...

According to Google, compared to singles, married people accumulate about four times more savings and assets. Divorced people have 77% less assets than singles. Scary statistics which tell us that divorce can clearly take its toll on your finances. What is the impact of divorce on your financial plan?

Your retirement funds are regarded as an asset which will be taken into account when reaching a settlement with your soon-to-be ex. Depending on your marital regime, this could mean that you are entitled to a portion of your ex husbands retirement fund. If this is the case, make sure that you involve your Financial Adviser to ensure that the fund is correctly named in the divorce order as well as the percentage of the fund (referred to as pension interest) that you are entitled to. Not wording your divorce order correctly could result in costly delays.

Once the divorce order is finalised, your Financial Adviser will be able to advise you on how best to proceed. You have the option to either withdraw the funds from your ex husband’s retirement fund or to transfer the funds to your own retirement or preservation fund. If you take a withdrawal there could be a tax implication, whereas if you transfer the funds to another approved fund, the transfer will be tax free, provided your tax affairs are in order. Of course the obvious advantage to preserving the benefit is that it will go a long way to securing your retirement.

Unfortunately this rule works both ways and it could mean that your ex husband is entitled to your retirement benefits. If this is the case, make sure that you complete a detailed retirement needs analysis with your financial adviser to ensure that the amount awarded to your spouse does not leave a gaping hole in your retirement plan. Committing to additional savings now, could mean that you make up the deficit in a few years.

Your Will should be updated in the event of any life changing event and divorce is certainly no exception. Changing your Will alone is not sufficient. It is vital to change your beneficiary nominations on all of your life assurance policies as well. Our law assumes that you have intended to disinherit your ex-spouse for a window period of up to three months after divorce. However make sure that within this three month period, you have reviewed and changed your beneficiary nominations on any life assurance policies. After the three months, should anything happen to you, your beneficiary nomination will stand. Not changing this, could result in your ex spouse inheriting from you, years after your divorce.

Aristotle Onassis said that, “If women didn’t exist, all the money in the world would have no meaning” Make sure that you take control of your financial future. Create a financial plan that ensures that your money has meaning and allows you to truly own your life as a woman.

References:

[1] These figures are based on the Lifestyle Protector product range which represents the last nine years of new business.