Your Financial Future:
Why Women Need to Talk About This Issue
Widowhood is one of life’s tragedies that most families hope to avoid. However, for most married women, it is inevitable.
It’s a life situation that can affect even those who appear to be safe. In 1998, it happened to Katie Couric, America’s favorite morning co-anchor of NBC’s “Today” show. When Katie became a widow at the age of 41, she also became part of those dreaded statistics; a third of women who become widowed are younger than age 60, and half of all women who will become widowed become so by age 65.
Fortunately for Katie Couric, her heartbreak does not include the harsh financial challenges that generally follow for the average American widow. Barring large sums in life insurance or other assets, the economics of widowhood usually include a sharp drop in income. For many women, the road to poverty begins after their husbands die. As women age, they become more vulnerable to poverty. Nearly a third of single women over age 75 are living in poverty with less than $890 a month to live on.
For someone Katie’s age with two young children under age 18, the Social Security system kicks in as an important safety net by providing a form of “life insurance” for survivors. When someone dies who has worked and paid into the Social Security system, part of the taxes go towards survivor’s insurance. Survivor’s benefits can be paid to certain family members that include widows, children and dependent parents. Although most working people view the Social Security system as a far distant retirement program, in fact, it pays more benefits to children than any other federal program.
After the earner’s death, family members are determined eligible if they meet certain factors – nobody will need more than 40 credits or 10 years of work. But the number of work credits you need depends on your age when you die – the younger a person is, the fewer work credits are needed to be eligible for a survivor benefit.
The amount of the benefit is based on the earnings of the person who died. For example, a monthly family survivor’s benefit for a spouse and two children would be paid until the children reach the age 18. At that time the widow’s benefits stop, but they will begin again when the survivor reaches age 60, the eligible age for a reduced survivor benefit. If she can afford to wait until age 65, then she will receive a full benefit. If she is disabled, she is eligible at age 50.
Older widows, women who become widowed after age 60, are usually in a more precarious financial situation unless they have substantial savings, pensions or life insurance due to choices made long before they become widowed.
At retirement age, the woman can choose to collect as the wife of the worker (half of her husband’s benefit) or on her own work record. Most often, the woman collects as the wife of a retired worker because all retirement benefits are based on lifetime earnings, and men almost always earn more in a lifetime than women.
The problem is that when her husband dies, most often the wife’s benefit is cut by anywhere from one-third to one-half. Yet official income projections assume that a one-person household needs 80% of their original income to achieve the same standard of living that the couple had. This is the widow’s first step into the spiral of poverty.
Living Longer Means You Will Need More Income
Women’s precarious financial situation is made even more worrisome due to the fact that women tend to live longer than men by about five years. This means they need more retirement income saved to cover those extra years. Unfortunately, women rarely save enough money to maintain their standard of living during these years.
What Can Be Done
We need to make sure that all women know about their vulnerability to these risks and that policymakers and politicians, who are making changes to programs, understand how they directly affect women.
For More Information
WISER’s Fact Sheet entitled “Social Security: What Every Woman Needs to Know” contains more information about widow’s benefits.
A product of the POWERCenter, a joint project of WISER and the National Center on Women & Aging, funded by the U.S. Administration on Aging.