Many boomer women are at a financial loss after a split
By Warren S. Hersch
The loss of a spouse following a marriage breakup frequently is traumatizing both emotionally and financially. More often than not, advisors say, the transition is hardest on boomer women divorcees.
“Eighty percent of the female clients I counsel are alone or in transition,” says Candace Bahr, a managing partner at Bahr Investment Group,” Carlsbad, Calif. “A great number of them, particularly divorcees, are unprepared to manage their finances individually,” or to deal with a steep drop in income and assets. Bahr observes that, whereas many men exit a relationship in as stable a condition financially, the standard of living among women declines on average 27% after a divorce. And that can be distressing.
Says Dorothy “Dot” Mechtenberg, president of Denver-based Mechtenberg Financial Group: “A lot of these women say they fear ending up as bag ladies.”
The more recent the divorce, say advisors, generally the more difficult is the transition. Thats all the more true for female boomer divorcees who never before had to contend with the myriad aspects of financial planning: saving for retirement; funding a childs college education; caring for aging parents and their own long-term needs; and estate planning.
Maria Umbach, vice president and head of marketing for individual life business at Prudential Financial, Newark, N.J., adds that the emotional impact of a divorce can undermine the boomer womans confidence in her ability to make financial decisions, especially in cases where she did not choose to divorce or had no time to adjust.
Among boomer divorcees, the need for counseling applies as much to women who are financially well-positioned subsequent to the divorce as to those in lower income brackets. Indeed, Charles Failla, a principal at Sovereign Financial Group, New York, says affluent boomer divorcees constitute a growing percentage of his clientele.
“Many of these Jane Does never had to deal with finances,” he says. “Now, suddenly, they have a net worth in the seven figures and they dont know what the next steps are.”
Adds Bahr: “Youd think high-net-worth women have a better understanding of retirement planning needs than women in lower income and asset categories. But I always say, you can be financially illiterate and wealthy at the same time. These women have to wise up quicklyor risk losing their wealth.”
Given their generally more extensive financial planning needs compared with other boomers, female divorcees tend to make goodand frequentlyprofitable clients. But advisors caution to watch out for complications.
Failla points to a husband and wife who remained clients after their divorce. The result: Many back-and-forth phone calls to ascertain, for example, how much of each former spouses salary would go to funding their childrens higher education. The breakup, notes Failla, effectively doubled his work. “Its like dealing with two completely different clients,” he says.
Other boomer divorcees, inclined to live beyond their means after a breakup, sometimes need a lot of talking to. Bahr cites a 52-year-old woman who had $1 million-plus in investable assets and expected to generate an unrealistically high $120,000 annually from her portfolio to live on. Bahr says the client had difficulty reducing her spending, in part because she felt cheated by her ex-husband.
Because of the twin emotional and financial challenges that many female boomers contend with after a divorce, advisors would do well to spend extra time working with these clients, observers say.
“The one thing [women divorcees] like most is someone who is willing to take the time to explain things to them,” says Failla. “Two things will result: Theyll feel more comfortable about the plan. And theyll be more likely to follow it.”
Adds Bahr: “For a lot of advisors, working with a divorced woman can be more difficult because the process requires more patience. But the reward is much greater because youll have her full commitment.”
Reproduced from National Underwriter Edition, March 25, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.