How to Overcome the Financial Challenges of Widowhood with a Solid Financial Plan

In the US, the average age of widowhood is only 59 years old, according to the US Census Bureau. Two times as many women became widowed versus men in 2019. Widowhood is particularly challenging to women because they typically live longer than men and have more significant lifetime financial needs.

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Woman in black walking alone

In the US, the average age of widowhood is only 59 years old, according to the US Census Bureau. Two times as many women became widowed versus men in 2019. Widowhood is particularly challenging to women because they typically live longer than men and have more significant lifetime financial needs. 

Losing a spouse is tremendously detrimental to the surviving spouse’s wellness. Their physical, mental, and financial health are often under attack. Healing from profound loss involves a network of support and strategies, including friends, family, and professionals.   

No one wants to think about losing a partner. But being prepared financially can help ensure financial wellbeing at a time of loss. Here are some tips for women to help overcome the financial challenges of widowhood. 

Delay Major Financial Decisions

Financial decisions, particularly major ones, are best made when reason and clear thinking are amply available and rigorously applied. The sheer emotional weight of losing a spouse requires adequate care and attention to manage grief. Settling an estate involves a myriad of tasks and chores from the mundane to the exceptionally tedious. Therefore, I typically recommend delaying any immediate, unnecessary major financial decision making. Having a professional team to help is essential.

Assemble Your Team 

Upon the death of a spouse, it’s crucial to get together your financial team, including a financial planner, attorney, and accountant. Having one of these team members act as the “chief” or central point of contact helps simplify the communication and decision making. A primary consideration early on in the process following the loss of a spouse is to avoid rash decisions that you will later regret. 

Take Care of Immediate Financial Necessities

Many couples share financial responsibilities. For instance, the husband takes care of the investments, and the wife handles the bills and the checking account. When a spouse is unexpectedly lost, this can create a headache if the surviving spouse is unaware of specific financial responsibilities. It’s good to have a plan in place so that the husband and wife are aware of all the financial obligations. In a time of loss, have an appointed relative or close advisor help with the immediate, day-to-day financial needs until you can regain your flooring emotionally. Be sure that you are taking care of necessities like keeping your bills current and responding to any immediate financial needs. 

Life Insurance

Life insurance proceeds can be taken in two ways, either at once (a lump sum) or payable over time in monthly disbursements. This is where a financial advisor will benefit the decision-making process for a widow. It may make sense to take the life insurance proceeds over time instead of all at once if cash needs aren’t immediate. Likewise, the widow may benefit from investing a lump sum payment in a diversified manner suitable for her long term needs and risk tolerance. 

Social Security 

A widow can claim survivor social security based on her age and income, up to 100 percent of her spouse’s benefit. The benefit the widow receives is based on the earnings of the deceased and how much was paid into social security over their lifetime. Younger widows have more available options to get the maximum benefit since they can choose to collect social security based on the higher of their income or their spouse’s level. Keep in mind that social security benefits have lots of nuances that can profoundly affect survivor benefits. Timing a social security claim is essential when it comes to getting the most from the benefits. Be sure to consult with a qualified advisor that reviews your unique circumstances before making any critical decisions.

Retirement Accounts

If a widow inherits an individual retirement account and is less than 70 ½, she can transfer the account directly to her own retirement account without a required distribution until 70 ½, thus keeping the account in a tax-deferred status. Some widows who need cash after their spouse’s passing may withdraw retirement assets without early withdrawal penalty if they are under 59 ½ and the spouse’s retirement account is transferred into a new retirement account. The proceeds, however, are still considered taxable distributions. 

A Strong Case for Developing a Solid Financial Plan 

Preparing for a significant personal loss, like a spouse’s death, is a challenging task to face, particularly in wellness. Developing a solid financial plan works in your favor by reducing stress and uncertainty at a difficult time and ensuring financial health.  

Sources:

Beshwate, T. A. (2020). The impact of widowhood: How to support well-being for these men and women. Journal on Active Aging, 34–43.  

https://www.ssa.gov/benefits/survivors/ifyou.html https://www.census.gov/content/dam/Census/library/publications/2018/acs/ACS-38.pdf https://data.census.gov/cedsci/table?q=widow&tid=ACSDT1Y2019.B12502&hidePreview=false

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