It’s no surprise that women outlive men. Census data has made this clear for years and most women understand the odds that late in life, they will likely be on their own. Among the baby boom generation, it’s estimated that seven out of 10 wives will outlive their husbands.
Many, however, are shocked by how long they may be on their own. According to the Women’s Institute for a Secure Retirement, half of all women who will become widowed become so by age 65.
The passing of a spouse certainly brings grieving and heartache that carry enough stress on their own. Unfortunately, the period of transition after death is often made even more difficult by the unanticipated leap into the deep end of personal financial management.
Some women are better managers of family finances than men and are well equipped to confidently manage their money. Often, however, financial literacy is an acknowledged fear of many women. It is a topic that can induce anxiety and stress on its own without having money decisions added to the significant transition of adjusting to life without a spouse.
Acquiring enough financial knowledge to make money decisions with confidence can go a long way toward easing the transition to widowhood.
Given the startling numbers about the possibility of early widowhood — possibly still in the working years, not the golden years — it’s clear that the earlier you can build an understanding of your financial foundation the better. Even if you feel fairly invincible in your “middle age,” it’s important to consider how you could ease future trauma at the point in time when you may be least emotionally ready to deal with financial stress.
For those whose futures have been unexpectedly changed there is a path to clarity and financial peace of mind.
TAKE TIME TO PLAN
Even at times when a death hasn’t caused a new set of considerations for the surviving spouse, personal finances can be a jigsaw puzzle with many pieces that are difficult to determine how they fit together.
When dealing with the death of a spouse, it can be overwhelming but there is not usually a need to make urgent decisions. Take time to get organized and think logically about priorities. Before you can put together the puzzle, you have to look at the picture on the box and understand what you’re building. What should your financial plan look like? Re-evaluate what you value, what’s important to you, the purpose of your money. You might change your goals or timeline for previously expressed goals. You might reconsider how and where you want to live.
When you have a sense of what you value and want your money to work toward, you can then move forward to create a financial plan that identifies your options and helps you make decisions. A written financial plan gives you a basis to correct course if life or your preferences evolve differently than you expect. The plan should evaluate not just what you have now, but what you will need to cover many more years of financial security.
This reset of your life goals and the purpose of your money should also help you think in terms of “what if?” scenarios that could identify where you have flexibility to think differently or where there are particular stress points in your long-term financial planning.
FROM CASH FLOW TO INVESTMENT STRATEGY
Changes to your income and budget should be addressed before you consider more complex investment, insurance and tax issues. Widows need to understand changes to Social Security income, possibly survivor pension payments and how they relate to expenses.
With those month-to-month basics understood, then you can move into rules for inheriting investment accounts or insurance proceeds and how to put these resources to work smartly.
It will be important to review your investment strategy, too. Men often have significantly higher risk tolerance than women when it comes to managing money in IRAs or brokerage accounts. It could be that your investment objective is different enough going forward that the investments should be revised to fit your new plan.
It’s certainly not just wives who should be looking out for their financial security. Even husbands who feel like they have a good handle on the finances should document specific plans or establish relationships with trusted advisers well ahead of when they may feel they need to. Taking this action is a form of insurance that can bring a lot of peace of mind to a widowed spouse at a time when it’s most needed.Gary Brooks is a certified financial planner and the president of Brooks, Hughes & Jones, a registered investment adviser in Old Town Tacoma. Reach him at firstname.lastname@example.org.