Minimizing Risk to Your Nest Egg and Legacy as a Single Woman

It's a surprising statistic, but studies show that most women die single.¹ For some, living independently is a choice, while others find themselves single due to unforeseen circumstances like divorce or widowhood. Regardless of the reason, this reality highlights the need for women to take an active role in their financial planning. 

While many discussions on financial planning strategies for women focus on savings and investment strategies, it's equally important to address the other side of the equation—risk management. Protecting your assets through insurance and estate planning is just as critical as building wealth in the first place. For example, when a single client of mine faced a health crisis that left her unable to work for over a year, the impact on her finances could have been catastrophic. Fortunately, she had proper risk management safeguards in place, including disability insurance and a recently reviewed estate plan that allowed her to focus on her health without sacrificing financial stability and providing peace of mind through a scary time. 

Let’s walk through some key strategies to help you protect your assets and preserve your financial independence, no matter what life has in store. 

1. Insurance: A Key to Protecting Your Assets 

Insurance is the cornerstone of any well-rounded risk management strategy. As a single woman, it’s important to ensure you take steps to protect yourself against unexpected events that could threaten the wealth and resources you've worked hard to accumulate. Here are several types of insurance coverage I strongly recommend women consider incorporating to protect their financial well-being: 

Disability Insurance 

If you’re still in your working years and rely on your income for daily living and saving for retirement, disability insurance is a must. If you become ill or injured and cannot work, having a policy in place that subsidizes a majority of your temporary or permanent lost income allows you to keep your financial plan intact even though life has taken an unexpected turn. 

Important considerations when choosing disability coverage: 

• Workplace disability coverage may not be enough, as it may only cover a portion of your income or might stop as soon as you can perform any job (not necessarily the one you are most qualified for). Some questions to ask about your workplace coverage are – What percentage of my income does it cover?  Is my bonus also included in that calculation?  How long does the coverage last?  If I had to claim this benefit, would it be considered pre or post-tax? After all of these questions are answered, there is a good chance that you would prefer to have more disability coverage than your workplace plan offers. 

• Own occupation coverage is critical. This type of policy will pay out benefits if you're unable to perform the specific duties of your current job, not just any job.   Most people I know would like to avoid being forced to go back to work at a menial, unstimulating job because their illness or injury does not allow them to do what they have specialized in and excelled at for their entire career. 

For more information on disability insurance, read this in-depth article by my colleague and Senior Wealth Manager Barb Black.

Long-Term Care Insurance 

A topic that I know is particularly challenging for single woman to address is long term care and aging alone. This conversation often strikes a nerve because it brings to light the reality that you may not have a partner to rely on for help with caregiving as you age and need assistance with daily tasks. Long-term care insurance can help mitigate the financial burden of hiring caregivers or securing assisted living. It can also offer more options for your living environment and the type of care you receive. The cost of care, whether at home or in assisted living, can far exceed what an individual is accustomed to spending as an active adult. Long-term care insurance can help alleviate this financial burden. It also offers reassurance, allowing you to live an active life with fewer concerns about your finances while you're healthy, knowing you're well-covered if your health declines. 

Liability Insurance 

It’s important to have sufficient liability coverage on your homeowner's, auto, and umbrella policies to protect your assets in case of a creditor claim. None of us can predict if we will find ourselves in a situation where we are being sued for an accident that takes place on our property, a mistake on the roads, etc. Without adequate liability coverage, your personal savings, retirement accounts, and other assets could be at risk. An umbrella policy offers an extra layer of protection above and beyond the coverage limits of your homeowners and auto policies, safeguarding your wealth from large claims. 

Life Insurance 

While life insurance might not be as high of a priority for single women, especially those without dependents, it may be worth considering if you have discretionary income and want to leave a sum of money to a special charity, extended family, or a cherished friend. If you do choose to get life insurance, make sure it’s structured in a way that meets your long-term financial goals and is financially sustainable for you. 

2. Estate Planning: Ensuring Your Wishes Are Honored 

Estate planning is another essential form of risk management for single women. In fact, single women who work with advisors are twice as likely as their married counterparts to establish advance directives or living wills and identify beneficiaries.² The estate planning process ensures your assets are distributed according to your wishes, your medical care preferences are respected, and taxes and unnecessary expenses, such as legal fees, are minimized. 

Without a spouse, one critical area to address is the nomination of a power of attorney for health and property. If you become incapacitated and cannot make decisions for yourself, your designated powers of attorney will be responsible for making medical and financial decisions on your behalf.  Imagine you become seriously ill and are unable to make decisions about your medical care. Without a named power of attorney in place, there could be delays in treatment as family members or doctors wait to sort out who should be speaking on your behalf. By choosing a trusted person with whom you've discussed your wishes and preferences well in advance, you can ensure that your wishes are respected, and decisions are made promptly. 

Another key consideration is keeping your estate planning documents up to date, especially if you become single later in life. Documents like your will, living will, healthcare directive and trust should all be reviewed regularly. Are you still naming a former spouse as beneficiary, executor, or trustee? You certainly want to update those immediately. You may want to include charities, grandchildren, or a new life partner. As a single woman, you have unlimited options as to how you’d like to leave your legacy but they must be properly addressed in your estate plan. Without clear and updated documents, complications can arise, leading to delays or disputes. 

Your financial advisor is there to guide you through this process. By maintaining open communication with your advisor and everyone involved, you’ll ensure your wishes are clear, making the process smoother for everyone involved. 

Securing Your Independence Through Thoughtful Planning 

Being single offers unique freedoms and opportunities, but it also presents distinct challenges when it comes to health-related and financial risks. Unlike those with a partner to rely on for caregiving or financial support, single women must take extra steps to protect themselves. It’s important to have trusted support in place. Partnering with a financial advisor can help you navigate these challenges, simplify complex decisions, and ensure you have the right insurance coverage and estate plan in place. This ultimately provides women with what they desire most—a sense of security and confidence about their future.