8 Financial Challenges of Retirement & Losing a Spouse
By Tony Walker

Losing a spouse is a life altering event. For some, that loss will come through divorce while others will face the tragedy of their spouse passing away. However a person comes to be single, this event will change the trajectory of their financial security, especially as it relates to retirement.

Talking about losing a spouse is a downer, but you have to be prepared. If you can think through the possibility now, you can have a plan for tomorrow. What you don’t want to do is wait until you are grieving to figure out your financial future.

This is why you should start asking the right questions and considering what will change if you lose your spouse. You can save yourself from the unknown and fear that comes from an uncertain future in a very lonely time.

Here are my top eight considerations I walk my clients through when they are planning for the possibility of losing a spouse.

1. Losing your spouse’s Social Security

Social Security will issue survivor benefits if the widow has reached retirement age. But this amount could be reduced for a number of reasons including if the widow has not reached the retirement age or if the spouse drew on their Social Security early. If you are divorced, you may be eligible to draw on the Social Security benefits of your ex-spouse, but other circumstances such as remarrying can disqualify you from this benefit.

Navigating Social Security benefits can be confusing to say the least, but it is still important to know exactly what you are due.

2. Potential loss of your spouse’s pension

Similar to Social Security benefits, the loss of a spouse may cause a reduction or loss in pension benefits depending on where the spouse worked, when they retired, and when they passed away. In some cases, a person can waive their right to spouse benefits or set up their pension to only pay while they are alive.

You need to know exactly what you are due before you can factor this income into your single retirement.

3. Higher tax bracket

A lot of newly single retirees are surprised to learn that they are suddenly thrust into a higher tax bracket.

For example, right now, if you have a combined income of $100,000 with the standard duction of $24,000, your tax rate would be a low 12%.

But if you lose a spouse who only contributed $30,000, making your new income $70,000 with a standard deduction of $12,000 because you are single, that can change your tax rate to 22%.

Essentially, you are penalized for losing a spouse and will need to factor this into how you manage your money through retirement.

4. Loss of 401(k) benefits

When you lose a spouse, you also lose their contributions to a 401(k). In some situations, a divorcee or surviving spouse may need to draw their 401(k) early to cover immediate expenses. This is just another example of how your retirement plan may need to change if you lose a spouse.

5. Your expenses will probably not go down that much

Many people assume that being single will reduce their expenses, but the truth is that it doesn’t change much. You still have to pay the same mortgage, the same taxes, the same homeowners insurance and other essentials that don’t change with your new status.

6. Losing a spouse that handles the money

It’s not uncommon for one partner to take the lead on handling money for the relationship. Every so often, the spouse that handles the money will come to our retirement planning meetings alone. But what happens when that person gets sick or dies? How does the surviving spouse suddenly jump in to manage their finances?

This is an unfair responsibility to thrust on someone all at once. It’s much better to plan together or at least plan for the possibility the other partner may have to assume control.

7. Family members with different wishes

Without a secure financial plan, it may be easier for well-intending family members to derail your wishes. If you have a clear picture of how you want to spend your retirement, back it up with a clear financial plan to achieve the lifestyle you want.

8. Living in a home that is way too big to handle

As a couple, you can split responsibilities and maintain your property. But without your spouse, the home may be too much to handle all alone. One example is if your husband loves mowing the ten acres on his zero turn mower, but you don’t. If he passes away, will you have the finances to pay for this service or will you need to find better accommodations?

Questions like these are tough. It’s not fun to talk about divorce or death, but we must if we want true financial security. Then, if the worst happens, you can at least be empowered with information and rest easy knowing the one thing you don’t have to worry about is your finances.

ABOUT THE AUTHOR

Tony Walker is a bestselling author and retirement planning specialist based out of Kentucky. With over 2,500 clients, Walker is recognized in the industry as a pioneer in the field of retirement savers in how to best use and enjoy their money while they still can. He is also the author of his newest book called, Live Well, Die Broke.




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