In financial planning, we talk a lot about risk—how much risk you can afford to take with your investments, what kinds of risk to look out for, how risk affects potential reward, and how to mitigate risks in your own life. These are pretty standard “risk topics” financial advisors address with their clients all the time, men and women alike. But, women in particular ought to be wary of another risk they could one day face and that’s the risk of becoming a widow.
We admit, this sounds a little strange on the surface. Most wouldn’t typically consider this a financial risk in the way we typically think about them. But, the statistics regarding widowhood are astounding and prove widowhood to be one of the greatest financial risks a woman can face.
Here are some numbers to give you an idea where we’re coming from:
- Age: 50% of all women who become widowed in the US are under age 59.
- LengthofPotentialWidowhood: The average female life expectancy in the US is 79, which means two decades where women potentially have to manage money alone.
- LossofBenefits: The monthly Social Security benefit cut for widows ranges from 33% to 50%, compared to the couple’s benefit.
- LossofIncome: The income drop can be even greater if the spouse’s pension plan is reduced or eliminated upon their death.
- LossofTaxDeductionsandFilingStatus: Taxes can increase for a widow who goes from married filing jointly to a single-filer.
BEAT THE ODDS WITH SUPPORT, SELF-EXPLORATION, AND STRATEGIC MONEY MOVES
If you’re a widow, it may feel like the odds are stacked against you. But, there are some simple steps you can take to protect yourself financially now and in the future. The good news is that none of these steps have to be taken alone. In fact, step one is about finding the right support to help you succeed in steps two and three (and beyond).
So, take a deep breath and relax. This isn’t a to-do list. We suggest approaching this list as advice from a friend---well, more like a group of friends who have helped scores of other women just like you approach the unknown world of widowhood with a little more confidence and a lot less stress. No part of the journey will be easy, but it can get easier.
1) Put Together a Financial Team You Can Trust
Whether you’ve always been involved in the decisions regarding your family finances, or doing it is new to you, you’ll want to enlist the help of a fiduciary, fee-only financial advisor who can help guide you when things get tough. Of course, we know that at times it seems as if things couldn’t possibly get any tougher, but that’s exactly why you need help.
The main issue with decision-making after the loss of a spouse is that it can be clouded with so many frustrating and competing emotions. But the decisions you make now will have a lasting impact long into your future. Having an advisor (or group of advisors) to help you navigate these tough questions and tough situations will ensure you don’t make compulsory or emotional decisions that will negatively influence your financial future.
Besides, it isn’t every day that you have to settle your spouse’s estate, transfer assets to your name, close accounts, update beneficiaries, decide what to do with your current residence, and plan for your future needs as a newly single woman. These are all tasks your advisor can help you complete.
You may also be interested in our Survivor Checklist: Navigating the Loss of Your Spouse.
Now, you and your spouse may have been working with an advisor and a CPA already. And that’s great! But if you don’t feel comfortable with these individuals, you should consider a switch. For those seeking guidance on key issues like estate planning, tax planning and long-term financial planning and investing, it’s crucial to work with a financial advisor who understands your unique needs and goals.
2) Talk Through Your Greatest Financial Fears with Your Advisor
For most widows, the greatest fear is running out of money (especially for those women who are already retired). But that doesn’t mean you don’t have other fears. Perhaps you are worried that your loss of income will result in major lifestyle changes. Or maybe you aren’t sure how to manage your cash flow or get your taxes paid now that things have changed.
You’re going to have a lot of questions and a lot of concerns. Your financial team should be the ones here answering those questions and providing the backup you need. Remember, you need to be discussing these financial fears with your advisor. This will be a good way to uncover if they are rational (and how to best approach them) or if they are simply the result of the emotional experience you’re going through.
3) Finesse Your Financial Affairs for Your New Needs as a Widow
Once you’ve gotten a team together and have brought your most pertinent financial concerns to light, it’s time to start rearranging your finances to fit your new needs as a widow. Specifically, you’ll want to revisit your cash flow and your investment mix.
As far as cash flow is concerned, you’ll want to make sure your most pressing and immediate needs can be met first before making any major financial decisions. That is, be sure you know how your bills and expenses will be covered for the next six months so you don’t get behind on payments or accrue unnecessary credit card debt.
With this squared away, you can begin looking at some of the bigger picture items like aligning your investment portfolio to match your new life goals as a widow. The mixture of stocks and bonds and risk you had during your marriage may not be appropriate for you now that you are single. Many clients come to us with portfolios inherited from their late spouses to review how their money is invested, and what we often find is that the risk profile is not appropriate for a widow in her later years of life. Most women will look to hold a more conservative position If they are already retired or nearing retirement age. So, we help them create a new investment strategy that is more appropriate for them, with lower-risk stocks and bonds. We make sure they will have the income and growth they need to live with peace of mind knowing that their investments are not only being made strategically, but with preservation in mind.
ADDRESSING ALL YOUR NEEDS—EMOTIONAL AND FINANCIAL
In addition to addressing your financial future, your emotional and mental health are of paramount importance. Your team should be instrumental in helping you navigate this transition from both perspectives as you heal.
At Northstar Financial Planning, our team of Certified Financial Transitionist® (CeFT®) professionals are uniquely trained to do just that. Not only are we CFPs with years of experience helping widows make the best financial decisions, but we are CeFT®s who specialize in helping them through the emotional side of the process, as well.
A Certified Financial Transitionist® (CeFT®) is a professional with an established career in the financial services industry who recognizes the importance and power of the personal side of money and the unique challenges widowhood can present on this front. As CeFT®s, we know how to keep clients safe and support them during their healing journey.
Whether you are newly widowed or have been going through this transition for some time, our all-female team is here to help. Schedule your complimentary Get Acquainted meeting today to see how our team of experts could benefit you.