Surviving Financially After the Death of a Spouse

Managing Post Retirement Risk

Some retirement benefits such as social security or pensions could stop if a spouse passes away. The role of life insurance, wills, estate plans, pension plans, annuities and other ways to manage the risk.

In retirement, you’ll face many personal and financial planning considerations—one of the most significant being the death of a spouse or partner. Cindy Levering, co-author of Managing Post-Retirement Risk, published by the Society of Actuaries, discusses this critical issue and the steps individuals can take to manage this risk.

Understanding the Financial Risk

Some income sources, like Social Security or traditional pension benefits, may stop after the death of a spouse or former spouse—depending on the options selected. That’s why it’s essential to make these choices before retirement, with a clear understanding of what will happen if one partner passes away.

If the spouse or partner was a caregiver, their passing might bring financial problems to the surviving spouse—especially if they have disabilities and now need to replace that caregiving support. On the other hand, if the surviving spouse was the caregiver, they might find daily life less difficult, as they no longer carry that responsibility.

Change in Household Finances

The assets and income once needed to support two people in a household now only need to support one. However, this doesn’t mean the expenses are cut in half. Many people assume that, but expenses typically drop to about 65% to 75%, not 50%.

Widows, in particular, often need more help than others. Many may not have family nearby to support them. It’s crucial to think about and plan for these things in advance so that if the event does occur, you know what to do—even while grieving.

Financial Tools to Manage Post-Retirement Risk

There are many financial vehicles available that can be used individually or in combination. These include:

Life insurance

Survivor income

Social Security

Traditional pension plans (making appropriate elections at retirement)

Annuities

Long-term care insurance (although the market is not as robust as it once was)

Savings and investments

It’s important for both partners to know what they have in terms of savings and investments.

Importance of Estate Planning

Wills and estate planning are also very important. You might want to have a trust set up. It’s also critical to keep beneficiary designations up to date.

Support from Family or Friends

Adult family members or friends may be able to help adjust to new circumstances by:

Making financial changes

Managing finances

Assessing choices

Providing care

Claiming Social Security Carefully

As mentioned earlier, married couples need to be very careful with their Social Security claiming strategies, including retirement dates and the options selected with regard to survivor benefits. It’s a complicated area with many moving parts.

Planning for Survivors with Limited Financial Capability

In cases where one partner managed the finances and the other had limited financial knowledge or ability, purchasing an annuity might be a good option. This can ensure steady income without the need to actively manage funds.

However, there are trade-offs—especially if that annuity ties up assets that might be needed in an emergency.

Final Thoughts

There’s a lot to think about when it comes to financial planning after the death of a spouse, but preparing ahead can make a real difference. As Cindy notes from personal experience, having these decisions made in advance helps during a time of grief and uncertainty.

“Having those things set and decided in advance makes a big difference in terms of managing the risk.”