Looking to the Future as a Widow

Jane Young, CFP, EA

Jane Young, CFP, EA

During the first few years of widowhood you need to take care of yourself and give yourself time to grieve.  During this time it’s best to focus on issues that need immediate attention and avoid making long term financial decisions.   Everyone’s timeframe is different, but after a few years you may be ready to start looking toward the future.   Initially, this may be difficult and very emotional.  It’s not unusual to take two steps forward and one step back.  Take it slow and gradually start creating a plan for your future.

Before the loss of your husband, you set goals and dreams together.  It’s very hard to let go of those dreams and start planning for a future on your own.  Many widows feel they are betraying their husband by changing their plans.  This is simply not true, now that your husband is gone your situation is different, and you need to chart a course that meets your new situation.

Start by identifying your values and what is truly import.  Make a list of what you want and need in your life.   It may help to evaluate different areas of your life and identify your needs and desires in different categories such as: family, health, social, faith, financial, community and continuing education.   Using this information, set some broad goals to be achieved over the next five years as well as some long term goals. Some big decisions may come out of this process including where and how you want to live.  Do you want to live in a new city, new house or maybe downsize to something easier to maintain?  If you are still working, do you want to make some career changes?  Do you want or need to go back to school? How do you want to spend your time and money over the next five years?

Once you have identified your goals, develop a financial plan that will enable you to put your plans into action.  Your financial plan needs to provide a balance between your long term needs and your short term goals.  Evaluate your current situation.  Identify your current net worth, your current income and your current expenses.  Are your expenses in alignment with your goals or do you need to make some adjustments?  This is your opportunity to adjust your lifestyle and spending habits to support your goals.

In developing your financial plan, set aside funds for major expenses such as college tuition, a new vehicle or home maintenance.  You should also consider paying off card debt and maintaining an emergency fund of at least four months of expenses.   Do some planning to be sure you’re saving enough for retirement.   If you are in retirement, ensure you have enough funds to cover your projected expenses throughout retirement.  Finally, budget some money just for fun -to do some traveling or pursue some hobbies.

Financial Advice after Losing a Spouse

Jane Young, CFP, EA

Jane Young, CFP, EA

After the funeral is over and everyone has returned home you are faced with the overwhelming task of getting your financial affairs in order.  It’s natural to feel disinterested, distracted and confused with all the decisions that need to be made.  Over the next few years you may feel like you are in a fog and you may have trouble concentrating. During the first couple years be easy on yourself and avoid making any major decisions.  You may be approached by a lot of people trying to give you advice and sell you products, avoid any major changes or decision for at least a year.  Don’t buy or sell a house or make major decisions on where you want to live, avoid any major changes to your investments and avoid making any significant gifts to charity or family members at this time.  Be aware of salespeople who use scare tactics to coax you into making decisions before you are ready.  Take it slow, give yourself time to grieve.   In a few years you may have a completely different perspective on how you want to proceed. 

There are some things that need to be done right away.  Initially it is important to be sure you have enough liquidity to cover your living expenses.  Start by getting organized – if you have always handled the household finances you know what bills need to be paid and where all of your assets are.  If not review all of your current bills and go through the credit card statement and check register to get handle on bills that will need to be paid.  Pull together all of your financial statements to understand your current situation.  Evaluate you current income situation to be sure you have enough money to cover your expenses.

Relatively soon you will want to apply for any benefits for which you may be entitled.  This may include Social Security, Veterans Benefits, Life Insurance or a Pension.   If you spouse was working, be sure to contact their employer to apply for any unpaid wages or survivor benefits.  This is also a good time to make sure you have adequate health insurance.  You should also contact your home and auto insurance company to make sure your coverage is intact.

At this point you may want to assemble a financial support team to help you through this difficult time.  Depending on the complexity of your situation, it may be helpful to hire an Estate Planning Attorney, a Certified Public Account and a fee-only Certified Financial Planner to help you settle the estate, file tax returns, retitle assets and eventually develop of financial plan.  Ask friends and colleagues to recommend and help you select trusted professionals.

Understanding Social Security Survivors Benefits is Worth the Effort

Jane Young, CFP, EA

Jane Young, CFP, EA

There are a myriad of different Social Security options available to widows and widowers.  If you have lost a spouse, it is worthwhile to take the time required to fully understand your Social Security benefits. As a widow or widower, you have the choice of taking Social Security based on your own work record, or Social Security based on the work record of your spouse (survivor benefits).  You are eligible for 100% of your deceased spouse’s basic benefit, at full retirement age.  Reduced benefits are available as early as age 60, and if you are disabled, benefits can begin at 50.  The full retirement age is 66 if you were born between 1945 and 1956, and gradually increases up to 67 if you were born between 1957 and 1960.  The normal retirement age for everyone born after 1960 is 67.

If you started taking Social Security on your own record, before the loss of your spouse, call Social Security to see if you can receive more in the form of survivor benefits.  One nice feature of Social Security survivor’s benefits is the option to begin taking benefits based on your own earnings record, and later switch to survivors benefits.  Conversely, you can begin taking survivor’s benefits and later switch to benefits based on your own work record.   Unlike standard spousal benefits, you can switch even if you started taking benefits prior to reaching full retirement age.

Generally, you cannot get survivor’s benefits if you remarry before age 60.  After age 60, remarriage does not impact your benefits.  Additionally, at age 62 you are eligible to get benefits based on your new spouses benefits.  You may have the choice between benefits based on your own work record, benefits based on the work record of your deceased spouse, or benefits based on the work record of your current spouse.  Unfortunately, you have to choose from one of these options.  If other family members are entitled to survivor’s benefits, there is a limit to the total amount that can be paid to a family.

 If you receive a pension from a federal, state, or local government job where you did not pay Social Security, your survivor’s benefits may be reduced.    Your Social Security benefits will be reduced by two thirds of your government pension.  Additionally, if you collect Social Security based on your own work record, and you receive a pension from a job where you did not pay Social Security, your benefit may be reduced due to the Windfall Elimination Provision. Be sure to discuss this with your Social Security representative before you file for benefits.

Social Security survivor’s benefit can be very complex; please take the time to fully understand your options.  Before filing for Social Security, research the options available to you at www.socialsecurity.gov and meet with a Social Security representative to fully understand your choices.

First Financial Steps for Widows

 

Jane Young, CFP, EA

Jane Young, CFP, EA

If you have recently lost a spouse you may not have the energy or the interest to address the financial issues that need to be dealt with.  Experiencing such a tragic loss is emotionally exhausting.   It’s hard to focus on financial issues, but you have a nagging fear that important issues aren’t being addressed.  This can cause tremendous stress.  Find ways to simplify, organize, and prioritize activities that must be addressed immediately and postpone those that can wait.  Be easy on yourself, it is normal to feel like you are in a fog.  This will begin to clear in about a year, but you may still be fuzzy for about three years.  Take things one day at a time and move at your own pace.  Don’t let anyone pressure you into making decisions before your head is clear and you are ready to move forward.

Your first step should be to get organized.   You may not be quite ready to tackle the urgent paperwork, but you want to be sure that nothing is lost.  Create three in-boxes to separate all incoming correspondence by bills and urgent paperwork, personal correspondence, and non-urgent paperwork.  You should also start pulling together important documents including  wills and trusts, investment and bank statements, insurance policies, deeds and titles, tax returns, loan documents, your marriage certificate, and  20 copies of the death certificate. 

Your next step is to be sure you have the funds to cover immediate cash flow needs.  Review your current bills, credit card statements, and checking account to determine what your monthly expenses have been.  Compare this to your current cash position and income sources to be sure you have enough money to cover expenses over the next six months.  At this time your focus should be on short term spending requirements.   Be sure to pay current bills, but use caution with bills that seem suspicious or that may have been paid already.

Once your short term cash flow needs are covered, do a full inventory of assets, liabilities and benefits available to you.  This will be needed to settle the estate and to provide you with information on your long term financial situation.   Apply for life insurance, Social Security, and pension benefits that you may be entitled to.  You should also contact insurance providers to be sure you are adequately covered.

Hire an attorney to help you settle the estate.  An attorney can help you with your appointment as the personal representative and walk you through the activities required to settle the estate. 

Avoid making any major decisions for at least two years, and do not let anyone pressure you into making decisions before you are ready.  Most opportunities will still be there when you are ready to make a decision.   Beware!  There are a lot of wolves in sheep’s clothing out there preying on recent widows.

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