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  • Archive for the ‘Widowhood’ Category

    The Financial Impact of Widowhood

    Wednesday, May 13th, 2015

    Key to HomeAt WISER, we frequently hear from women who find themselves struggling financially after their husbands pass away; many of them saying “If only I knew…” when it comes to financial matters. Women’s longer life expectancy puts them at greater risk for running out of money in their older years, but other factors often compound this longevity risk and make the situation even more challenging.

    While more women today are becoming involved in their family’s long-term finances[i], those seniors who are experiencing widowhood now were part of a generation where women were less likely to be involved in their family’s retirement planning and investments. This can make the difficult experience of losing a spouse even harder for a widow who then does not know what assets she has or whether she will have enough money to live out the rest of her life.

    Surveys also show that women are less likely to trust financial advisors, and more likely to rely on family and friends for financial advice.[ii] Even when a couple has a financial advisor, if the husband dies, the wife may not feel comfortable working with the advisor alone. This is especially true if the advisor does not give her the same level of attention or respect, or communicate in a way that resonates with her.

    Finally, women do not understand their Social Security benefits as well as they should. Many women rely heavily on Social Security as a leading source of income in their later years, yet most are not familiar with even the basic rules of spousal and survivor benefits, nor do they understand what the different options are for claiming Social Security that can greatly impact their benefit.

    Recent research by WISER confirms many of the findings in this report. In 2013, WISER released A Survey of Recent Widows. Among some of its findings:

    *    Half of the widows lost at least 50% of their income when their husbands died.

    *    37% had difficulty both determining what they were entitled to receive from Social Security and initiating Social Security benefits after their husbands died.

    *    26% had difficulty locating bank accounts and investments and obtaining access to them after their husbands died.

    *    26% of the widows whose husbands were responsible for financial planning had to move to less expensive housing as a result of their spouse’s death.

    There is much that can be done to better educate and support women on their financial journey. It starts with encouraging women of all ages to get actively involved in their finances; helping them understand the basics and where to go for help; and building their confidence and motivation to take further action. Here are some key tips:

    *    Know what all the different financial accounts are that both you and your spouse have (bank accounts, investments accounts, Social Security benefits, insurances, loans, credit cards, etc.). You can access your Social Security statement online by going to www.ssa.gov/myaccount;

    *    Organize all the necessary information about those accounts in one place and review them together (names of the financial institutions where accounts are held, passwords, contact information for any account representatives or agents, etc.);

    *    If you have a financial advisor, be involved with those meetings and conversations and make he or she is working with both of you;

    *    Educate yourself about the basics of finances and investing, including Social Security and how that may be impacted if you become a widow.

    Widowhood is a vulnerable period both emotionally and financially. The more we can help women (including ourselves!) prepare for this likely event, the better their chances for living out their retirement years with a sense of security and dignity.

    EXTRA! Important facts that every woman should know to prepare for the possibility of widowhood:

    *    A widow’s income may only be two-thirds of what it was prior to the spouse’s death. In fact, a recent GAO report found that the income of women near or in retirement dropped 37 percent as a result of widowhood.[iii]

    *    Federal pension law requires company and union pension plans to provide a joint and survivor benefit option. The right to the joint and survivor pension benefit can only be given up if the wife gives her permission in writing.

    *    When selecting the pension benefit at the time of the husband’s retirement, a wife needs to consider the options very carefully. The joint and survivor annuity offers a smaller monthly payment than other pension benefit options; however, for women who expect to depend on their husband’s pension as a source of income throughout their longer lives, this is generally a better option. Without the joint and survivor benefit, all pension payments will stop once the husband dies.

    *    Different rules apply to certain other retirement savings plans, such as 401(k)s. Death benefits from a 401(k) are generally paid out in a lump sum, which can be rolled over—tax-free—into an Individual Retirement Account (IRA).

     

    This article is adapted from an essay written by Lara Hinz, WISER’s Director of Programs, that was featured in the Impact of Retirement Risk on Women, a report published by the Society of Actuaries and WISER.

    The “Campaign for a Secure Retirement:  Helping Millions of Americans Plan and Save for Retirement”  is a joint educational retirement campaign to encourage retirement planning and saving and to promote the online Social Security Statement, available through my Social Security, as an important retirement planning tool. 

    [i] Fidelity Investments, Couples Retirement Study. September 2013.

    [ii] TIAA-CREF, Financial Advice Survey. October 2013.

    [iii] U.S. GAO. Retirement Security: Women Still Face Challenges. GAP-12-699.  July 19, 2012.

     

     

     

     

    It’s National Save For Retirement Week! Today’s Topic: Managing Money in Retirement

    Friday, October 26th, 2012

    It’s National Save for Retirement Week 2012! A week dedicated to building knowledge and taking action toward securing your retirement. Each day this week we are going to look at a different contributing factor to retirement and help you increase your understanding of it so that you can take action and be prepared. Today we are looking at managing money in retirement.

    When it comes to preparing for retirement, the focus is typically on saving and increasing your assets until you are ready to retire. But building that nest egg is only part of the picture. Once you retire, you need to think about how you will spend and manage that money so that it lasts for the rest of your lifetime. This can be difficult, so it is worth putting in some time to learn about your options and think about what your strategy might be.

    Listen to our five-minute podcast, “What Income Will You Rely on in Retirement” to get a better understanding of the typical sources of retirement income, and what that income needs to support in your later years.

    Speaking of retirement income, as we talked about in our first blog of this series, Social Security is a vital source of income for women.  Deciding when to claim Social Security is a very important decision as you near retirement age; it can significantly impact how much your monthly benefit will be for the rest of your life. Check out the Social Security Administration’s online calculators to get estimates of what your benefit might be if you claim early, at full retirement age, or wait even longer. 

    Another great resource is this series of eleven retirement decision briefs published by the Society of Actuaries. Each focuses on a specific retirement-related decision area and offers key considerations. A sample of topics include When Should I Retire?, Designing a Monthly Paycheck for Retirement, and When Retirement Comes Too Soon.

    Annuities, which allow you to convert a lump sum of money into a lifetime income stream, might also be a good option for some people.  Learn more about them in WISER’s booklet, Making Your Money Last a Lifetime: Why You Need to Know About Annuities.

    Finally, widowhood is also an important issue for women since they are more likely than men to live alone at some point during their retirement years. Widowhood is usually associated with a sharp drop in income. Read through our Widow’s Checklist so that you know how to prepare for the possibility of widowhood, and check out some of our other resources on our Divorce & Widowhood webpage.

    Thanks for following us this week as we celebrated National Save for Retirement Week.  We hope the information we provided will encourage you to make saving for retirement a priority, not just for one week but throughout your life.  And if you have learned something useful, pass it on!  Let’s help each other get on track for a safe and secure retirement.

    WISER

    About Us

    WISER is a nonprofit organization that works to help women, educators and policymakers understand the important issues surrounding women's retirement income. WISER creates a variety of consumer publications including fact sheets, booklets and a quarterly newsletter that explain in easy-to-understand language the complex issues surrounding Social Security, divorce, pay equity, pensions, savings and investments, banking, home-ownership, long-term care and disability insurance.

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