Are you financially prepared if your husband or wife dies? Based on the results of a study commissioned by New York Life, the answer is a resounding No! 68% of women survivors and nearly half of male survivors reported significant life changes following the loss of their spouse with financial concerns topping the list.
The survey outlined the financial challenges faced by women and men survivors who’d lost their spouse within the past 10 years. While both men and women felt the financial and life impact of losing their spouse, women were disproportionally affected.
One of the key differences in financial impact for men and women is whether or not the dying spouse had life insurance. If there was no life insurance then 40% of the women survivors reported struggling to meet basic needs within the first year after the death of their spouse compared with 24% of men.
There’s a gap between feeling secure and actually being secure. 77% of women reported feeling financially secure prior to losing their spouse, however many were confronted with a harsher reality. The top 5 life changes facing widows and widowers listed include:
- Adjusting to a change in income level (women 55% / men 34%)
- Budgeting for one income (women 46% / men 32%)
- Cutting discretionary spending (women 38% / men 24%)
- No longer being able to afford a vacation (women 22% / men 13%)
- No longer adequately saving for retirement (women 21% / men 10%)
The top wishes, or lessons learned, expressed by women responders were:
- There should have be some or more life insurance on their spouse
- They should have saved more
- They should have had detailed discussions about what might happen financially and otherwise when one of the spouses died
- There had been a better financial plan in place
- They’d filed all of their important papers in a central location
These findings provide a framework for all couples to address together now, before having to deal with it in a state of emotional distress. Here are 4 suggestions to address together now.
Master List: Create a master list of all banking, credit card, and other financial accounts including account numbers, statements, balances, and contact or log in information. Include life insurance policies (both personal and group coverage through work benefits). In addition, create a list of important contacts (life insurance agent & company, financial planner, accountant, etc.) along with their contact information. This should be filed in a secure place where both of you are able to access it.
Budget: Review your total financial picture together and create a workable budget of what it would take to run your household for either of you as a survivor.
Adjust: Based on your current financial position and income, would either of you face a budgetary crises if the other spouse dies? If there are enough funds to float the budget, commit to review annually with each other. However, if there is a budget shortfall, identify how much it is and what steps need to be taken now, together, to alleviate it. I would also suggest factoring inflation into your projections at a rate of 3% to 5% annually.
Review Annually: Once the budget is created, update all the information each year and review together to determine if you’re on track or need to make any additional adjustments.
These topics may be scary, uncomfortable, and even anxiety producing to address together, but if you’ll do so now, you will make survivorship easier for both of you. What suggestions or questions do you have? Share them and your experiences with us on our Google + and Facebook pages. I’d love to hear from you.