When Two Become One: Financial Planning for Life as a Single Woman

For most married women in the U.S., widowhood is inevitable. Women are four times more likely than men to outlive their spouse, according to 2012 U.S. Census Bureau data. And when they do, they live an average of more than a decade as a widow. Yet many are not financially prepared for the transition. “Even if women and their spouses think they’ve done a good job of planning financially for retirement, they’ve most likely planned for their golden years as a couple,” said Northwestern Mutual’s Jennifer Jedrzejewski, senior attorney, advanced planning. “They haven’t necessarily prepared for the financial transition brought on by the death of a spouse.”

In the midst of what may be one of the most difficult periods of a lifetime, new widows are faced with making a host of financial decisions. And because they are likely to be vulnerable following the death of a spouse, experts say it’s not unusual for widows to make critical decisions based on emotion rather than logic, or to forego making decisions all together. “Even the simplest of tasks—like getting assets re-titled correctly—can be quite a challenge when you’re grieving,” said Jedrzejewski, “not to mention the burden of making decisions that can have a much greater impact on your future financial security.”

To avoid unnecessary risk, married women should identify today someone they can trust to guide them through the financial transition when and if the time comes. “You need one person who can give you clear direction, help you understand your options, and empower you to make smart decisions based on your situation and your priorities,” said Jedrzejewski. “Financial professionals and estate planning attorneys are great choices, and it’s best to work with someone who has access to a network of other professionals you may need along the way.”

At the very least it’s a good idea for women to familiarize themselves with the types of decisions they may need to make as widows, such as:

Managing proceeds from a life insurance policy: When a substantial sum of money is paid from a death benefit, beneficiaries don’t always know how to manage the windfall. What happens once the check is cashed? How can the money be invested to help meet both short- and long-term goals? Who will be entrusted to make—or to assist in making—those investment decisions?

Managing qualified retirement account funds: How might the proceeds from a death benefit impact the overall retirement income plan? With a windfall of available money, might it make sense to delay taking withdrawals from qualified plans such as 401(k)s? With the help of your financial representative, a surviving spouse will want to re-evaluate the role of each of her assets to ensure she’s making the most of her available retirement income.

Claiming Social Security: Widows can choose whether to take Social Security based on their own work record or on the work record of their spouse, known as a survivor benefit. It may also be possible for a widow to initially take the survivor benefit and then switch to her own benefit at a later date when she’s eligible to receive the maximum amount. Your financial representative can help create a strategy for maximizing this benefit.

Updating estate planning documents: Following the death of a spouse, estate-planning documents will need to be updated to reflect new designations such as beneficiaries and financial and health care powers of attorney. It’s important for women to think about, in advance, whom they will choose for those roles.

While many of the most critical decisions can’t be made until the time comes, it’s never too soon for women to take what Jedrzejewski calls the first and most important step: Develop a relationship today with someone you trust to guide you through the financial transition to widowhood and empower you— as an individual—to take control of your financial future.

Courtesy of Bob Hudson CFP, www.northwesternmutual.com

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