Do you think about what will happen if your spouse passes away and you become widowed? Do you think about what will happen to your spouse if you pass away?
The thought of losing your life partner can be overwhelming, and it’s easy to avoid these questions altogether. But without a plan in place, you or your partner might be left struggling to stay afloat in the future.
Why You Need to Ask the Tough Questions
The financial impact of becoming widowed can be as overwhelming as the emotional impact. Frequently, there is a decline in standard of living for the surviving spouse due to finances. Household income can decline because of changes in Social Security benefits and the potential loss of the deceased spouse’s retirement income.
On the other side of that equation is recognizing that the cost of living as an individual won’t decline nearly as much; things like mortgage payments and monthly living expenses will likely remain the same.
Asking each other the big question identifies where you might need help: “What would I struggle with financially if I were to become widowed?”
Plan and Prepare
It may also be helpful for each partner to make an “after I’m gone” file. This file should include important financial documents, like retirement account plans and banking information, as well as any insurance documents, wills, powers of attorney, etc.
And be sure passwords to those accounts are included. Most importantly? Let your spouse know where you’re storing these important documents!
3 Steps to Organize Your Finances Ahead of Time
Collecting documents and trying to understand what you’re looking at while mourning is extremely challenging. Preparing the information and having hard conversations before needing the information will help smooth the process.
If your partner handles the finances, ask them to walk you through everything. You will want to:
1. Know your spouse’s retirement benefits
Make sure you have a complete understanding of your partner’s workplace retirement/pension plan. If you or your spouse do not have a retirement account large enough to live on, it is probably best not to waive the survivor’s annuity. Once the one holding the pension dies, the pension benefit payments will stop.
2. Have the correct contact information
Know who to contact if you are entitled to other employer plans like life insurance and death benefits. Since different rules apply to state, local and federal government pension plan payouts, be sure to contact their HR department and find out as much information about their plan as you can.
For example, you want to know whether rules require lump sum payouts or whether they can be rolled over to an IRA.
3. Know your Social Security benefits
Know your Social Security benefit options. Social Security will not pay you two benefits. If you are over age 60 and have been married at least 9 months, you can receive between 71 and 100 percent of your spouse’s Social Security benefit as a widow/er.
However, if you are collecting a benefit based on your own earnings, you may receive no additional benefit. Social Security will pay the highest one for which you are eligible.
(Tip: consider delaying when you and/or your spouse file for benefits. This will result in a larger survivor’s benefit).
Resources for Further Planning
There are two great resources for older adults that are especially helpful for widows and widowers who are having difficulty with their finances or other challenging aspects of widowhood:
- The Eldercare Locator is a nationwide service from the Department of Health and Human Services that connects older adults with a variety of local, trusted services in their community. Call 1-800-677-1116 or visit their website.
- Benefits Check Up is a free service of the National Council on Aging that allows you to quickly find benefit programs that could help pay for medications, health care, food, utilities and more. Find more information here.
Planning for widowhood is scary to think about – but putting a financial plan in place can save you and/or your spouse so much stress down the road. Connect with your financial advisor to explore more ways to plan your financial future.
Plan Ahead with Clarity
Want to explore more options for securing your future? Click here to connect with Clarity Financial Wealth today – we’re happy to help!