Are you prepared if you lose your spouse?

Are you nervous about what happens to you or your spouse if one of you significantly outlives the other?

I personally get very nervous, from time to time, when we come across a couple where the spouse that manages the finances believes that they just need to plan until the first spouse dies.  I have heard comments along the lines of “I want to enjoy what we have while we are together since the survivor won’t have much to spend money on”.  I find a statement like this to be scary in so many ways.  It is not uncommon to find that the spouse that manages the finances has selected his or her pension to end at death versus continuing to the survivor. 

In other relationships, I have seen people “bury their head in the sand” and hope that if they live life and ignore the future, that it will work out.  When we ask this type of person where they think they are financially, I can hear the stress in their voices when they say, “it is probably not good”. 

Everyone needs to have an idea of where their financial future lies but let’s be honest. Women that don’t know about their financial future are at a greater risk than men.

  • 75% of women become widows
  • The average age a woman becomes a widow is 59
  • In 64% of heterosexual relationship, the man is greater than 12 months older than the woman
  • In developed countries the average life expectancy at birth for women is 6 years longer than men
  • On average women need long term care 68% longer than men

No matter what type of relationship you are in, no matter what your gender is, no matter if you manage the finances for your relationship or rely on your spouse, it is important to know that your household is planning to support themselves financially until the second spouse passes away.  Here are some important things I want you to keep in mind and share (solve) with your spouse:

  • As advisors, we expect a surviving spouse to spend at least 80% out of pocket to maintain the same lifestyle
  • Tax rates are likely to rise since the survivor will no longer be filing married jointly
  • Credit cards and utilities can become a problem if they were established in the deceased’s name
  • Inheritance from relatives may not include the widow(er)
  • Spouses contribute more than just income and expenses, if they provide home maintenance, childcare, or other activities that the survivor doesn’t have the skills or time to accomplish you may be paying someone to help
  • You need to know where all the asset and liability accounts are and can access them quickly
  • If you or your spouse were previously married make sure that beneficiary designations, wills, and other documents have been updated to provide the correct destination of assets

All these things can be scary but the best way to obtain peace of mind is knowing what to expect if you become a widow(er).  Set aside a weekend to discuss finances with your spouse and make sure you are prepared.  If you don’t feel comfortable having this conversation or don’t feel confident that you can assess the outcomes, consider an independent financial planner to help guide you and your spouse.

Marshall Rathmell

Marshall Rathmell

Marshall Rathmell CFP®, CPA/PFS is the CEO, Shareholder and Financial Planner with BCR Wealth Strategies.