Widows, divorcees face unique financial challenges
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(Special) - Recent studies and data have shown quite clearly that women in Canada and around the world are controlling more wealth and taking on an increasingly active and leading role in both personal and family finances.
Due to the death of their spouses and/or partners and divorce, widows and divorcees face many similar challenges in terms of both emotions and the need to assume responsibility for their and their family's financial well-being.
Statistically, Canadian women on average have a life expectancy that is four years longer than men. According to Statistics Canada, at the end of 2016 there were an estimated 1.46 million widows in Canada and as the population ages, the number of widows is expected to increase.
There also are about 1.1 million divorced women in Canada. Add to the number of divorced women those who are separated from their husbands and the total rises to 1.5 million, exceeding the number of widows.
Not all divorcees get the kind of divorce settlements of famous movie stars or personalities that make the evening news. Statistics Canada data shows that the financial impact of divorce on women often is greater than that resulting from the death of a spouse, and on a relative basis, women in higher income brackets are more likely to suffer a change in their lifestyle than those from lower income groups.
Through either divorce or the death of a spouse, women face the very real possibility of finding themselves financially alone at some point in their lives.
"Widows and divorced women face many similar challenges in terms of both emotions and the need to assume full responsibility for their immediate family," says a report on women and wealth for IPC Private Wealth. "In many cases they face a partial loss of income and a change in the level of capital available for their future years."
One of the biggest challenges faced by widows in the years immediately following the death of a husband or partner is adjusting to a lower level of income from pension sources, government transfers or investments. Some reports have indicated that widows can experience a decline of 40 per cent in household income within five years of becoming a widow irrespective of their wealth status.
The financial impact on divorcees, however, can be even greater than it is for widows.
"The process of divorce can be very costly with legal fees that can range anywhere from $7,000 to $70,000 or more in the case of a contested divorce," says Kathleen Peace, senior financial consultant with Woodgate Financial Inc. of IPC Securities Corp. "There is the real challenge of having to try and stretch two incomes from just one. On average a single divorced woman will need an extra 30 per cent in income to maintain her standard of living before the divorce."
Peace advises newly-divorced women not to make any hurried decisions, take time to step back from their situation and consult a financial professional to help with saving and investing.
"Once divorced your future looks totally different than it did before," says Peace. "We suggest people don't make any major decisions for at least one year. Take time to process how your life and financial situations have changed."
Widows tend to look for a co-ordinated approach to their financial planning, one that takes into account their lifestyle, emotional as well as their financial needs.
Divorced women, however, might have a completely opposite focus given that the parties involved in the divorce may have completely different interests and objectives.
The report for IPC concludes that at some point in their lives 90 per cent of Canadian women will have sole responsibility for their personal financial well-being. Divorce has a more negative impact on the financial well-being of women than the death of a spouse and becoming single again is often accompanied by a reduction in income and financial assets and heightened fear about financial security. Women, therefore, are likely to benefit from the development and maintenance of a comprehensive financial plan.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
Copyright 2017 Talbot Boggs
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