Single female clients will soon comprise more of your book.

Data from the Vanier Institute for the Family finds more than half of 80-year-old women live alone at some point, compared to less than a quarter of men the same age. What’s more, the same report says only 46% of women and 44% of men are now expected to marry by age 50.

While financial-planning basics don’t change for singles, there are issues to keep in mind. First, the Conference Board of Canada finds women earn $0.79 on the dollar compared to men.

Second, single women can’t access the same tax-saving options as married couples. Their earnings can be further hit if they need to take time off to care for children or aging parents; or if they’re disrupted by a lengthy illness or disability.

Kristi Buchanan, an advisor with Sun Life Financial in Victoria, BC, says advisors sometimes make inaccurate assumptions about singles. For instance: “They’re not married, so they don’t have relationships that could impact their financial decisions.”

That’s not true. Siblings, nieces, nephews and even friends could all influence single clients’ estate plans. To suss out these ties, Buchanan asks whom they care about most; whom they consult on financial matters; and who they want to have inherit their money.

Kathryn Jankowski, VP and Financial Divorce Specialist at T.E. Wealth in Toronto, takes it a step further. “I invite [influencers] to appointments. The plans I put forward have to have acceptance from them as well.”

Financials for one

Jankowski’s single clients think about money differently. While her married clients tend to be concerned about the big picture, singles focus on spending and saving.

Having only one income means singles are less able to build up a cash buffer. They have to cover all necessities, including retirement savings, before considering discretionary expenses, like cable television and annual vacations. She recommends they also set aside at least six months of living expenses—more if they’re self-employed or work in high-turnover sectors.

Also important but often overlooked: insurance. “Never assume single clients don’t need insurance because they don’t have dependents,” says Buchanan. “All efforts to build wealth and provide retirement options can be undone in an instant if a major illness strikes. Discussing disability, critical illness and long-term-care insurance are a must.”

Read: How singles can build financial buffers

For singles who own large homes as a result of inheritance, divorce or widowhood, Jankowski suggests they consider downsizing or turning them into income properties, especially if gross housing costs (calculated as mortgage payments, maintenance fees, property taxes and utilities) start overtaking 33% of monthly spending. She’s told clients, “Downsize to half and you could retire five years earlier.”

In a hot market, renting out part of the house can offset expenses, but “if you have to pay to make a basement rentable with a separate [entrance and] kitchen, the costs may outweigh the benefits,” she says. Becoming a landlord also means having to account for vacant months and a new set of maintenance costs that stem from having non-owners under your roof. Further, rental income is taxable, so net revenue will depend on the client’s marginal tax rates.

For clients hoping to buy homes on a single income, Kim Dewar, portfolio manager at Odlum Brown Limited in Vancouver, suggests saving aggressively in RRSP accounts so they can avail themselves of the home buyer’s plan.

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Tim Landry

I just want to say that I wish more writers would mention the importance of “Living Benefits” – DI, CI & LTC. Death is terrible when it is someone close to you – but a severe disability (or prolonged dealing with problems due to ageing) are far more financially devastating. I know it is obvious but people need to be reminded that when they die, their income dies but so do their expenses. A prolonged disability – at any age – may lessen the income but expenses tend to rise significantly. If you depend on your income, investigate all of the “Living Benefit” products – and remember your group LTD is only as reliable as your job.

Wednesday, Jun 13, 2012 at 10:06 am Reply