Americans are living longer, with major ramifications for estate planning.
Researchers at TD Ameritrade wondered whether Americans, whose average life expectancy is 78.6 years, were planning accordingly, especially in the event of being separated from a partner or widowed at an advanced age.
In a survey released Tuesday, they found that 87% of respondents 40 and older had confidence in their ability to manage their own financial situation if they divorced or their spouse died later in life.
At the same time, however, 45% of men in the survey and 36% of women said they did not have a financial plan in place in the event of divorce or becoming widowed.
In addition, 94% of the 40-plus sample said they did not have a prenuptial agreement in place, including 91% of those with $250,000 or more in investable assets.
“Planning your finances around the potential end of a relationship due to divorce or death can be uncomfortable at the very least,” Keith Denerstein, director of investment products and guidance at TD Ameritrade, said in a statement.
“While the trepidation is understandable, preparing for these possible scenarios is important for future financial security, and therefore should be a key part of financial planning.”
The Harris Poll conducted the online survey from Aug. 30 to Sept. 10 among 2,000 U.S. adults ages 40 to 79 with at least $25,000 in investable assets.
Legacy of Divorce
Many divorcees in the survey, men especially, said that divorce had affected their ability to retire.
Forty-six percent of male divorcees said that getting divorced had derailed their retirement plans, compared with 36% of their female counterparts.
Forty percent of divorcees reported that they had less than $50,000 saved for retirement, compared with 32% of Americans overall in the same age bracket.
One in three said they had delayed their divorce longer than they wanted because of financial concerns.
Although the vast majority of divorcees did not have a prenuptial agreement in their previous marriage, 42% said they would get one if they remarried. This percentage shot up to 70% among those with $250,000 or more in investable assets.
Three in four also said a prenuptial agreement should include retirement assets.
Among married respondents, 48% said they expected their retirement timeline to differ from their partner’s. Only 25% said they were very prepared if they or their spouse had to retire earlier than expected.
Many respondents in the survey, especially younger ones, were uncertain how to approach end-of-life planning with their families, regardless of relationship status.
Those who were unsure of the best way to structure an inheritance for their family:
- Ages 40–49: 59%
- Ages 50–59: 48%
- Ages 60–69: 33%
- Ages 70–79: 27%
Those who did not know how to discuss legacy planning with their family:
- Ages 40–49: 48%
- Ages 50–59: 34%
- Ages 60–69: 26%
- Ages 70–79: 20%
The survey also found that many respondents had clammed up about other important matters.
Only 40% said they had discussed their desired funeral arrangements with their family to prevent debates about what they would have wanted.
Even fewer, 36%, had told someone where to find relevant financial passwords in case of an emergency, and just 30% had set aside money for end-of-life care, including caretaking and funeral arrangements.
Nor had three-quarters of respondents created a plan in the event that something should happen to the household’s primary financial decision maker.
Just one in five respondents said they had informed children how to access and manage their assets in case of emergency, or discussed inheritance and legacy planning with their offspring, or talked with them about health and caretaking planning.
“While it may be difficult to find the ‘right time,’ it’s crucial to discuss issues like legacy and caretaking planning with your spouse, children or extended family members,” Denerstein said.
“Planning ahead could provide a much-needed boost in financial security for loved ones who unexpectedly find themselves in these situations.”
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