Could the Premature Loss of Your Spouse Devastate Your Retirement?

Have you ever thought about what would happen to your finances if you lost your spouse prematurely? Most people avoid this topic, and understandably so. We don’t want to dwell on things that cause us emotional distress, but what we don’t realize is that by avoiding the topic, we could be setting up our financial life for disaster.

The truth is that women currently live longer than men in every country of the world. (1) In the U.S. specifically, women are expected to live until 81, and men 76. (2) What do these statistics mean for your retirement plan? Since 80% of women live longer than their spouses, often for an average of 14 years, you need a plan in place to protect the surviving spouse from a premature death devastating their finances. (3)

Help Plan And Protect

Losing a partner during can have a devastating impact on the surviving spouse’s financial security. Social Security benefits will be reduced, pension benefits may discontinue, and long-term care costs may increase without a spouse to share costs and provide care.

How do you avoid these risks? Build these events into your income plan. Make an effort to analyze where you would stand financially if you lost your spouse. What lifestyle changes would you need to make? What amount of income would be required to make up for the loss? Create a strategy taking into account the following solutions:

  1. Keep Each Other Informed

Typically, one spouse takes primary control of the finances. Only one spouse may be intimately aware of the location and status of investments, property deeds, life insurance benefits, and more. It’s a fairly common occurrence to have a new client visit my office for the first time after losing his or her spouse. Sometimes these individuals come to us for help because they have no idea how many accounts their spouse had, where they were held, or how they were performing. These cases can take months or years to resolve.

This situation can be easily avoided by keeping your spouse informed and involved in the finances. This simple step saves time, headache and heartache down the road.

  1. Consider Spousal And Survivor Benefits

Social Security benefits can make your head spin on a good day, but add in the extra factor of survivor benefits, and planning your claim gets even more complicated. Here are some things to think about when deciding when and how to claim Social Security benefits.

Delay Filing

In most cases, the husband has the greater benefit and the wife the lower one. The Society of Actuaries recommends that the lower earning spouse begin collecting benefits early while the higher earning spouse waits as long as possible. If both spouses wait to collect, and the husband dies before the wife, the wife can only receive one of the benefits – their own or the survivor’s benefit. Since women tend to live longer than men, delaying filing for the husband and filing early for themselves lets them have the use of their own benefit while their husband is still alive and also maximizes her survivor benefit when the husband passes away.

Choose Carefully

When electing pension benefits, consider your options wisely. Careful calculations should be done to see if the increased income from a single life option outweighs the future income available with the joint and survivor option. Further calculation can determine if life insurance should be considered to maximize your pension. Using this approach, when appropriate, a pension participant can elect the higher-paying single life option. When the plan participant passes away, the life insurance benefit covers the income needed by the survivor.

  1. Create A Will And Keep It Updated

The scary truth is that 64% of Americans don’t have a will. (4) Regardless of your health or age, a will is essential for outlining what will happen with your property. It also names your executor, who will carry out your wishes. You don’t want to leave these decisions to the state, which is what will happen if you don’t have a will.

If your spouse does have a will, you need to know where it is and have access to it. His or her will won’t serve any purpose if no one can find it. Also, it would be a good idea for your spouse to review the will to ensure it reflects his or her current wishes. How would it feel to discover after his or her death that someone else is listed as the heir? Make sure your spouse or other family members know how to access it when the time comes, and remember to review it regularly to ensure it is up-to-date.

  1. Beware Of Taxes

You may think that you won’t get hit with high taxes when your spouse dies because your income will decrease. But what many people don’t consider is that they will now be filing their taxes as a single filer and decreasing their deductions. After the death of a spouse, many find themselves consuming less income while jumping up to a higher tax bracket. Build this situation into your retirement plan.

  1. Work With An Advisor You Trust

Having a strong support system will carry you through the death of your spouse and give you the strength to move on. Part of that system should be a trusted financial professional. It is vital that you have someone you trust that you can turn to for help in financial matters.

At Prostatis, we believe it is worth your time to prepare for an unexpected death before it happens. We can work to prepare your finances for any situation and every stage of life. As you start preparing for an unexpected death, we are here to answer any questions you may have. Call us at (410) 863-1040 to set up an appointment today.

Securities offered through TCM Securities, Inc., Member FINRA/SIPC.
Prostatis Group LLC is a registered investment adviser. 
(1) http://www.prb.org/DataFinder/Topic/Rankings.aspx?ind=6
(2) Social Security Actuarial Life Table, 2016.
(3) https://www.census.gov/prod/2013pubs/p20-570.pdf
(4) https://www.usatoday.com/story/money/personalfinance/2015/07/11/estate-plan-will/71270548/

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