Widows And Widowers – What To Do in The First Year

There are approximately 15 million widows and widowers in the United States, most of them over age 65. According to Census Bureau data, a little over three million of them are under age 65, which can present different options and challenges. All of them faced the challenges of financial upheaval when their spouse passed away, although a larger percentage of women will face greater financial difficulties than men. 

Did you know that household income generally decreases about 40% when one spouse dies due to changes in Social Security benefits, a spouse’s retirement income, and earnings? That’s a sobering statistic because living expenses remain at 80-85% of what they were when the spouse was alive. 

For some widows and widowers, this means the road to poverty begins after their spouse dies with women being impacted in greater numbers than men. Statistics show that about half of widows in the US over the age of 65 live on less than $22,000 a year. 

If you would like additional information on SSA survivor benefits, you can contact the Social Security Administration or visit their website at www.ssa.gov

For Widows, Living Longer Means Planning Ahead Financially

Women tend to live about three years longer on average than men. Since women are typically younger than their husbands, it also means they will spend more years living as a widow, approximately 15+ years. One study showed that widowers tend to remarry at a higher rate than widows, lending to the overall statistics of widows facing greater financial difficulties in their later years. 

This means couples should begin saving early for their retirement years with this possibility as one consideration. Preparing for the financial future of your spouse and family now with trusted advisors is an essential task. 

Ideally, couples and families should plan years, if not decades, before the idea of becoming a widow or widower seems likely. Having detailed discussions and plans with a trusted advisor in place before a spouse passes on will make the transition and financial decisions easier to manage. 

A CERTIFIED FINANCIAL PLANNER™ (CFP®) professional, like Elijah Heath at Heath Wealth Advisors, learned from experience when his own mom became a widow. He created a workshop for widows called “Smart Women Finish Rich”, offering tips and advice to women who had to take charge of their financial situation, often with little preparation to do so. Continue reading for some of the advice he offered in these workshops. 

First Steps for Widows and Widowers 

When a spouse passes, the first step is to contact your estate and/or financial planner to ensure both your long-term financial needs and immediate living expenses are covered. These advisors can also step in to assist with important decisions that are difficult to face while grieving a lost spouse. 

If pre-planning was not done, the next step is to find a trusted person, perhaps someone who has no close emotional ties to the loved one, to help with decisions. Widows and widowers are facing many challenges immediately after the death of their spouse. Making the wrong choices based on grief, pressure, or simply not understanding the long-term effects can be devastating. 

It is not unheard of, for example, for a widow or widower to be pressured into spending far more than they planned on funeral arrangements. An impartial advisor can help by questioning whether some choices make sense in order to protect financial resources. Ideally, making funeral arrangements and paying for items such as the plot and casket are best done well before a spouse dies. 

If your spouse was working with a fiduciary – a financial advisor who must provide advice based on what is best for their clients, not themselves – such as a CFP® professional, that advisor is a good resource for making the right financial decisions at this time.   

Categorizing Financial Decisions – Now, Soon, Later 

If the spouse who managed the financial affairs and investments passes away first, the surviving spouse may realize they have no idea about the state of their finances, insurance policies, assets, and debts. In his experience as a CFP® professional, Elijah Heath found he often needed to help widows who had relied on their husbands to manage their financial affairs. Many times, they did not know where important documents were kept or how to locate essential records for account numbers and passwords to access accounts.  

One sound piece of advice is for a widow or widower to categorize financial decisions into three categories – now, soon, or later. Some financial decisions are urgent and need to be handled now. Others need attention soon and can be delayed for a month or several months. All other decisions can likely wait at least a year as the widow or widower has time to assess what their new circumstances look like and can make informed decisions without the stress and grief they were initially experiencing. 

Creating a Trusted Team for a Widow or Widower

Some of the professionals you may want to have as part of your trusted advisory team as a widow or widower can be an estate planning attorney, a certified public accountant (CPA), a tax attorney, and a financial planner to help you make smart financial decisions. 

When a couple has planned ahead, they can regularly meet with a trusted financial or estate planner to review their plans and determine if anything has changed since the last review. Even if only one spouse was handling the financial plans, it makes sense for the other spouse to have that trusted person’s contact information. This way they know who to contact when their spouse dies and have support to enact the plan that was created for them. 

Some of the financial questions a widow or widower needs to know would be necessities such as: 

  • Do you have sufficient liquid assets in the event of sudden or unexpected death? 
  • Do you have a healthy balance with your investments that will grow and accrue dividends for longer term goals? 
  • Have any children become adults who no longer need things like daycare or college costs included in your plans?
  • Does your plan still make sense when one or more sources of income disappears with the death of your spouse?  

Trusted advisors can also help create plans that consider the impact of dealing with the sudden death of a spouse. Many people think they will pass away when they are much older, sometimes not considering a sudden death such as a car accident or heart attack. When such an event occurs, there is no time to put affairs in order and prepare for the next steps. Without a current financial plan and trusted team, major decisions may be rushed unintentionally. 

Be Aware People May Take Advantage of a Widow’s Grief

An unscrupulous salesperson could convince a grieving widow or widower to agree to an investment product they’re stuck in for 20-30 years or create tax consequences they are not prepared to pay. Someone may play on feelings of guilt by telling them their departed spouse would “want” them to splurge and purchase a new car or luxury item they don’t need. Those kinds of financial choices need to wait because some decisions cannot be changed. 

Elijah Heath, CFP® at Heath Wealth Advisors, once accompanied a widow to the funeral home to assist with her husband’s burial arrangements. He was shocked to hear the funeral director upselling the widow on a very expensive casket, telling her that her beloved husband deserved the best. The director pulled on the widow’s emotions until Elijah asked for a break to speak to the widow privately. 

He reminded her that it wasn’t about spending more money on something the director said her husband “deserved”, but rather, it was to consider the money the widow would need to live on. Bringing someone with you who isn’t as emotionally distraught as a widow or widower is a wise decision. 

Making the Right Financial Decisions for You 

When you have a trusted financial team in place, they can help you coordinate your assets, determine the right type of registration on a new account that you will receive the inheritance from, and explain how you should accept transfers. They can review tax implications and how to stretch those over a longer period where possible. 

If the deceased spouse was named as the executor and heir of the new widow or widower’s estate, then a new one will need to be named by your estate planning attorney. These are some of the financial choices a widow or widower wants to make sure are done properly. 

As we mentioned earlier, living expenses usually remain at about 80-85% of what they were after your spouse dies. That means there may be some gaps because now there is less income to cover all expenses. 

For instance, the widow or widower will no longer receive the lesser of the two Social Security income checks. Or a pension plan may have been inaccurately set up as a life-only pension plan so that income stops when the retired spouse dies. These types of income changes mean you will want to reassess your financial needs with a new financial plan.

Financial Strategies for Widows and Widowers to Consider 

A fiduciary advisor can guide a widow or widower on financial strategies they may not have considered. Some of these might include: 

  • Setting up new accounts – sometimes it makes more sense to disclaim the property. 
  • Leave certain assets to children instead of the spouse. If the plan was to pass it to children anyway, but the widow or widower accepts it first to then pass it to their children, there may be a gifting tax.
  • IRA (Individual Retirement Account) situation where the widow or widower doesn’t need the funds. If the heirs and contingents are not set up correctly and the surviving spouse accepts the IRA funds, then taxes must be paid when money is withdrawn before passing it on to children.
  • Pay attention to generation-skipping tax, if the asset is too large. 
  • A widow or widower is allowed to start collecting Social Security Income at age 60. If it makes sense later, then they can switch to your own SSI benefit later (i.e. the amount is higher based on lifetime earnings). Keep in mind you may not be able to collect widow’s benefits if you work full-time based on income limits. 
  • Make sure your will is legal and enforceable in your state. If not, probate may be necessary. Probate can be a very lengthy process, about two years, although it can take as long as five years. Probate becomes a matter of public record and there are unscrupulous people who prey on widows and widowers during the probate process. 

Widow and Widowers Have Options With a New Financial Plan

How do you generate more income if you have lost it from one of these sources? With a trusted financial planner to assist you, you might discover you don’t need to replace all the lost income, but you need some income. For example, a life insurance policy could go to spouse tax-free if it was set up right. It can be a new source of income. 

Perhaps some living expenses can be reduced such as downsizing a home, selling a vacation property, or moving in with family. A two-part approach to reducing expenses and finding some replacement income can make a huge difference in the long-term financial stability of a widow or widower.  

Making the Best Personal Choices For You

One of the biggest mistakes Elijah has seen widows and widowers make on a personal level is to withdraw and become isolated. For most, it’s the first time they’ve lived alone in many years. They may be distraught, lonely, and even feel guilty. When a widow or widower gives in to these negative feelings, the likelihood that they will pass away in the next six months increases. 

Elijah has encouraged all the widows at his workshop to reach out to positive friends and family. Find groups and activities they enjoy with positive people around them. It may take a little time to adjust but make that a goal. Sometimes it can be a great time to reconnect with grown children, grandchildren, and siblings. Your family members still need you to be part of their lives. 

Widows and widowers can find things to occupy their time and give them a reason to fight for their future. Consider volunteering at a charity or your grandchildren’s school, working with animals, starting a new hobby or rekindling an old one, and finding a support group to talk with others about how to move forward. 

Another strategy Elijah shares is to create a “value ladder”. What things are important to you when it comes to money? One example might be, “I don’t want to become homeless.” Why is this important to you? The answers will help you search your heart for what is most important to you when it comes to spending your money. If you don’t want to be homeless, for example, then spending money on unnecessary items becomes easier to say no to. 

During this value ladder exercise at the workshop, Elijah has found the top rung of the ladder is often, “I don’t want to a burden. I want independence and to not be a burden to my kids the way my spouse was a burden in their final days.” 

One final insight from these widow workshops regarding widowers. When a husband loses his wife, his financial circumstances may be more stable, but he often loses the nurturer in the family who spent her time and energy regularly reaching out to their children and grandchildren. As a result, widowers may find they start to lose their connection to their family if they don’t work at staying in touch. Widowers should follow the same advice about finding positive people and activities to keep them active, especially in their family’s lives. 

Still Have Questions? Let Us Help

Elijah Heath is a CERTIFIED FINANCIAL PLANNER™ fiduciary with an ethical obligation to provide information, products, and services in your best interest, not what earns him the best fee or commission. Heath Wealth Management wants to be your advisor for life so you, your children, and grandchildren all benefit from the relationship.

Call us to learn more, ask questions about your specific circumstances, and determine if we are the right fit for you. Our phone number is 813-556-7171. We can also be reached by email at Elijah.Heath@LPL.com.