A Financial Planning Checklist for Newly Single Clients Over 50

Slideshow January 28, 2022 at 01:34 PM Share & Print

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Related: What Divorced Women Should Know About Claiming Social Security

Clients who become single when they are over 50 have a number of unique financial planning issues. This situation may arise due to the death of a spouse or a divorce. Women in this age bracket have not always been heavily involved in financial planning with their former husbands, though this is changing.

Clients who find themselves in this situation will need your help and expertise to plot a financial course going forward as a single person. In the gallery above are some issues that may arise.

Roger Wohlner

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1. Do a financial inventory

The first step in financial planning under any circumstances is to determine a starting point. When working with newly single clients who are over 50, this is a critical first step.

In the case of a widow or widower, what assets do they have, including those inherited from their former spouse? There may be jointly held assets such as a home or investment accounts. There may also be joint debts. Did their spouse have a pension or retirement accounts such as a 401(k) or IRA? Are they the beneficiary of any life insurance?

In the case of divorce, what assets or property are now theirs as part of the settlement? This might include the marital home, investment or cash accounts and a portion of the ex-spouse’s retirement accounts. There might also be alimony payments or a cash settlement. On the other hand, they might be the one paying alimony.

This is in addition to their own assets, such as investments, retirement accounts, real estate or a business they may own.

A key part of the financial inventory is doing a cash flow analysis involving both cash inflow and spending to see where your client stands as a newly single person.

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2. Planning for retirement as a single person

Your client will need to adjust their retirement planning to reflect the fact that they are planning for retirement as a single person rather than as a couple. This is a time to work with your client to make a new plan for retirement taking into account the changes in retirement resources, and perhaps goals.

If the client is working, be sure they are contributing to their 401(k). Look at IRAs and old retirement accounts to ensure they are properly allocated to align with your client’s goals.

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3. Social Security benefits

You will want to review not only your client’s own Social Security benefits, but also what they might be entitled to as a surviving spouse or a divorced spouse. There are distinct filing rules surrounding benefits for a surviving spouse and for taking benefits based on a divorced spouse’s earning record.

Your client will need your help around determining the optimal benefit claiming strategy concerning both their own benefits and those of their former spouse.

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4. Estate planning and life insurance

Your client will want to review their estate planning, including beneficiary designations on any life insurance policies, retirement plan accounts, annuities or trusts to determine if any changes are needed to reflect their objectives as a newly single person.

In addition, you will want to work with your client to review any wills or other estate documents to ensure they reflect their current objectives. Your client’s life insurance needs will depend on whether there are minor children or others who would need the death benefit in the event of their death.

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5. Tax planning

Your client’s newly single status will affect their tax planning. Filing as single is different from married filing jointly. A widow or widower may be eligible to continue to file as married and joint for up to two years if they meet certain requirements.

Tax planning at this stage is critically important, and you will want to facilitate a consultation with a tax professional if your firm doesn’t offer this service. Besides a change in filing status, this tax planning should reflect their current and projected income.

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6. Health care and long term care

Be sure that your client has a plan to meet their health insurance needs. This can be especially urgent if they were previously covered through their spouse’s employer’s plan. If they are working, they can probably join their employer’s plan if they are not covered there already. If they're eligible, Medicare can be an option as well.

You will want to work with your client to formulate a long-term care plan if needed. This might include buying a long-term care policy and looking at potential retirement communities.

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7. Each client is different

While it can be tempting to lump all newly single clients over 50 together as a group, like any client, each individual in this broad category is different with different financial planning needs.

Some of your newly single clients in this age bracket will be financially savvy. Many are working and may be professionals or business owners. Each client in this broad category is different. As their advisor, it's important that you assess their financial planning needs and gear your advice to those needs. This is perhaps the single most important thing you can do in the course of your planning for newly single clients over 50.

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