Financial Considerations for Widows and Widowers
One of the most challenging parts of my job as a wealth advisor is having a client pass away. My official role is to provide financial planning and investment advice to my clients. And long-term professional relationships have a way of transitioning into friendships.
When a client passes, there is certainly a period of reflection and mourning. Afterward, my primary goal is to help guide the surviving spouse through the daunting process of estate administration. Ultimately the goal is to transition toward maintaining financial independence as a widow or widower. With some proper planning, this difficult period can be a bit easier because we’ve minimized the surviving spouse’s financial worries.
One concern widows and widowers may have is whether they can maintain their current lifestyle after the passing of their spouse. Assuming that the couple already had retired, their expenses were most likely fixed, somewhat predictable and in line with their financial plan. End-of-life care, however, may have introduced new costs that consumed a good portion of the couple’s income and asset resources.
For instance, they may have brought in a home health aide that cost in the range of $4,000 per month on top of other living expenses. A stay in a skilled nursing facility may have cost the couple in excess of $10,000 per month. Losing a spouse is tragic. However, depending on the care costs involved toward the end of the dying partner’s life, the surviving spouse may gain some relief about being freed from these high costs.
There may also be other areas where the surviving spouse’s expenses may decrease. For instance, a widow or widower may determine that a house meant for two people may no longer be qualitatively desirable. It may be more manageable and cost-efficient to downsize to a smaller home or adult living community. The spouse may also be able to move to a less expensive geographic area, an option that wasn’t possible during the other spouse’s period of illness.
There may, however, be a period of time where expenses increase somewhat after the death of a spouse. For instance, the surviving spouse may have put off travel due to caregiving responsibilities. Visits with family are certainly a vital way to heal following a tragic loss. However, doing so may mean more out-of-pocket travel expenditures for a while.
While some living expenses may decrease after the death of a spouse, the surviving partner may experience downward adjustments to income as well.
The surviving spouse will now be eligible for a Social Security “survivor benefit.” That means the survivor will now receive just one benefit. It will be the higher of the two Social Security benefits the couple previously had received. Depending on the earnings history of both spouses, this may mean an income loss of $20,000 to $40,000 per year.
The survivor may also lose income from pensions or annuities the deceased spouse previously owned if a “life only” election was made on the income distribution. Also, if the deceased spouse listed someone other than the surviving spouse as the primary beneficiary on Individual Retirement Accounts (IRAs), the living spouse could lose access to that income as well.
As a result, it’s vitally important to review your beneficiary designations and estate plan regularly. Your goal is to ensure that your surviving spouse is either eligible to receive those benefits or, on the flip side, to disclaim them to other beneficiaries.
Finally, if life insurance played a role in the couple’s financial plan, those assets may now be available outright or held in trust. The surviving spouse should incorporate these assets into the financial plan moving forward.
Health care and housing considerations
I spend a great deal of time advising retirees on decisions regarding health care in retirement. In addition to thinking about funding (or potentially insuring) health care and long-term care costs, couples should also discuss where they may want to receive care. When a spouse passes, caregiving responsibilities for the surviving spouse may fall on adult children or siblings. Ideally, couples may want to create a health care plan by working with an Aging Life Care ProfessionalTM or other qualified caregiver.
Housing is both a qualitative and financial decision, of course. Some widows or widowers thrive in retirement communities where they can stay active and safe. Others prefer to stay in their own homes, assuming they have the financial means to support the costs.
I counsel my clients not to procrastinate about decisions related to housing and health care. When they do, the outcome tends to be more expensive than necessary.
Professional help is available
There’s no question about it: Losing a spouse is a difficult experience. Dealing with the financial aftermath of this loss can be a bit easier working with a wealth advisor who understands the issues you need to anticipate. You don’t need to go it alone as you navigate through the next chapter in your life.
Important disclosure information
Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.
This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.
RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.