At 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.