It’s time to start looking at widowhood as a when, rather than a what if.
Despite more women becoming involved in, or even taking over, the family finances, widowhood remains a significant risk factor when it comes to transitioning into poverty. More than one in five women living in poverty are 60 and older; and widows accounted for a nearly 46 percent of poor women age 60 and older in 2008.
A recent survey of women whose partners died showed that half of them lost at least 50 percent of their income following their loss, and 48 percent had difficulty determining what benefits they were entitled to from Social Security.
Given that women live longer than men — in every country in the world, in fact — it’s important to be prepared for your post-spouse life and start looking at widowhood as a when, rather than a what if. Here’s what you need to do to remain financially secure:
Get Involved in the Family Finances
If your husband currently handles all of your money, it’s time to change that, advises certified financial advisor and founder and President of EverGuide Financial Group Mark Painter, who has worked with several widows as clients.
“Be involved with financial decision making,” he says. “If you and your husband use a financial advisor, be involved in the meetings. I have found that clients with a dual role are more successful than those with one decision maker.”
You should also take inventory of every piece of financial information, advises Patrick McNally, founder and CEO of Retirement Lifestyles Advisory Group. This includes a list of all accounts at banks and brokerages, the names of the insurance companies where you hold policies, (as well the policy numbers and death benefit information), and contact information for your financial advisor, CPA, insurance agent, and attorney.
You should also know the location of all of your important documents, the combination to any safes, the location of the key to your safe deposit box, and a master list of computer logins and passwords.
Take Advantage of Life Insurance
If you don’t currently have a life insurance policy, it’s worth getting one.
“Life insurance is the easiest — not to mention tax-free — way to replace income after the death of a partner,” says Kerri Moriarty, a founder at Cinch Financial Life insurance. “The younger and healthier you are, the cheaper a term life insurance policy will be — I’m talking $13-$15 per month for a few hundred thousand dollars of coverage.”
Many people might forgo insurance if they’re young or don’t have children, but this is a mistake. “Especially in the event of a sudden loss or accident, if your partner were to pass away, you could replace his lost income for a number of years, or at least provide yourself some cushion to make adjustments as you get on your feet independently,” Moriarty explains.
Draft — and Revisit — Your Prenup
It’s important to use a prenuptial agreement to protect and exclude certain assets from your marriage, Moriarty says.
“You can continue to exclude assets throughout your marriage with modifications to the prenuptial agreement, which could prove extremely helpful after the death of a partner by possibly helping you avoid any large financial implications that could otherwise be considered joint marital property,” she explains.
Even if you don’t think you have assets that are significant enough to warrant a prenup, it may be worth speaking to a financial advisor before you tie the knot about drafting up paperwork, just in case.
Understand Your Survivor Benefits
After losing a spouse, trying to comprehend what you’re entitled to can be overwhelming. It’s crucial to know what exactly you’re supposed to receive before that day comes.
“Know your Social Security and pension benefits for both spouses, and have current statements,” says Brannon Lambert, CFP® at Canvasback Wealth Management, LLC. “You want to understand what survivor options you have. This may actually affect your decisions about those items long before your spouse passes.”
He also suggests making sure your beneficiaries are up to date, especially if this is the second marriage for your spouse, and that you have Transfer on Death designations (beneficiary designations for non-retirement accounts) and beneficiaries attached to as many assets as possible.
Post-death assets are evaluated in probate, a legal proceeding when a will is “proved,” and doing this can keep these assets from being frozen during this process, and can even help reduce probate costs, he says.
“A spouse who has many individually titled investment accounts can leave a complex and time-consuming mess for the surviving spouse,” says author of Preparing for Retirement and CFP® Ryan Glover.
Lambert agrees, and says the best way to avoid a major financial headache is to consolidate accounts, especially if your spouse has a bunch of like-titled IRA or DRIP accounts scattered around.
“Every account requires its very own process and documents when the owner or one of the owner passes,” he explains. “The more accounts that don’t serve a real strategic planning purpose, and that can be consolidated into one, means less time and paperwork to deal with.”
Work with Your Trusted Financial Advisor — Not the Bank
You may be tempted to let your bank handle everything after your spouse passes, but that could be a big mistake.
“They make it seem you have to put everything with them, and they line up a salesperson to gather all of your assets and then start selling you products,” Lambert says. Instead, consult your financial advisor to prepare both beforehand, and after, the death of a spouse.
If you haven’t worked with a financial advisor, accountant or lawyer yet, or if you typically let your husband speak with yours, it’s time to find someone or get to know the person. “This will put you way ahead of the game by having a core group of advisors that you already know and trust to lean on when things are difficult,” Painter says.
Don't Make Any Significant Life Changes Right Away
While you may be tempted to move out of your home (too many memories) or take that around-the-world trip (to get away from it all) following your spouse’s death, resist the urge.
This goes for making any decision that might affect your finances, from going over budget with your spending to changing your 401(k) contributions.
“We suggest that most widows make few or no significant life changes for the first year or so after losing a spouse,” says Warren A. Ward, CFP® and founder of WWA Planning & Investments. “For instance, an investment strategy that worked for many years is likely to be better for a bit longer than any sudden change suggested by a well-intentioned friend of a friend.”
Glover adds that it’s important to remember that cash is king when settling an estate. “Don’t be in a rush to spend or invest it until you have a full grasp on your new financial situation,” he advises.
A new way of life and a new budget can take some getting used to — no easy task when you’re grieving the loss of a partner — so maintaining normalcy with your cash flow can alleviate potential financial issues that might come from overspending.
There’s no doubt that losing a spouse is an emotionally devastating event. But given how many women end up financially insecure after becoming widows, it’s crucial to take the necessary steps before a tragedy occurs to protect yourself financially. Having candid money conversations with your spouse and your financial advisor now will ensure a smoother transition into your post-spouse life.