BY: ANDREW STEWART
One of the fastest growing groups of people in poverty is widows over the age of 65. That is a very scary statistic. Most widows confront financial illiteracy at the same time they have to deal with the emotional upheaval of one of the most stressful human experiences. Truly a double whammy. Women who were never enlightened to their family’s finances and those who relied solely on their husbands’ financial acumen or his advisors, should be aware. The number of currently married women who will live alone at some point during their retirement years continues to grow at a steady pace, and many may find themselves unprepared to fly financially solo. No matter when it happens, becoming single is a stressful and emotional experience. It can also be a financial burden, especially during your retirement years. In many households, only one spouse handles the finances, retirement planning, investing and legal matters. If you are not that spouse and something happens, you may feel overwhelmed and confused about what steps you should be taking. Here are things to be aware of and ways to be better prepared, just in case.
How much life insurance did your husband have and where are the policies?
There are two potential sources of life insurance coverage to pursue: insurance you and your husband bought through an insurance agent and any employer policies that might exist. If your husband was an employee and only had life insurance under his companies group coverage till retirement, you will discover that his coverage will be gone after retirement. If you had large term insurance policies while your children were at home or to cover debt and income replacement the premium renewals could have become too high to sustain and also ended.
Actively manage and plan your financial future
When there are meetings with your financial planner or attorney, make sure you are present and involved in the discussions. While you may fully trust your spouse to handle your finances, you still need to know what’s going on so if you are left alone, you can continue with those plans without feeling overwhelmed or confused.
Who are your advisors & where is the paperwork?
You may have been introduced to lawyers, insurance advisors, certified public accountants and financial planners but don’t feel comfortable going to any of them for advice. It’s important to have a relationship with the different professionals that will handle your finances. Attorneys will help guide you through the probate process and will be able to make modifications to your estate planning documents, including updating your will, your living will and powers of attorney to reflect your new circumstances. CPA is a welcome partner. When it comes time to filing taxes, your CPA can help you maximize deductions and plan for all your upcoming tax obligations, which may include estate taxes and returns for living trusts. Your financial planner can assess your current financial situation and the impact of your husband’s passing on your financial situation going forward.
Calculate your potential income and expenses at retirement
Probably the most important part of contingency planning for your retirement years is figuring out how to live on just one income instead of two. Planning for life if you survive your spouse is financially easier than contingencies for a late divorce. In a divorce, you are often dividing most of your assets, including your home, and then determining how best to live off of what is left. Start with what income sources you will have available to you in your name and determine what the best Social Security claiming options might be. Once you have a better idea of your potential income, compare that to your expenses. Create a mock budget and determine where you may need to make adjustments. One way to make sure that you will still be able to meet monthly obligations if you are single in retirement is to have a plan in place to pay off large debts before retirement.