Many women go about retirement planning with their spouses. The reality is, however, they also need to plan for the phase of their retirement that starts after their spouse’s death, particularly if they’re in heterosexual marriages. Women typically live longer than men, so they should prepare for a “second retirement,” often with different needs and associated costs.
In this “Financially Savvy Female” column, we’re chatting with Tom West, chartered financial consultant and founder of Lifecare Affordability Plan, which helps families plan and pay for care, about how women should approach their “second retirement.”
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“Of once-married women aged 75 years and older, 58% of women are widows,” West noted. “In 2021, according to data from the US Census Bureau, widows accounted for 30% of all older women. There were more than three times as many widows (9.1 million women) as widowers (2.7 million men). These statistics highlight the importance of women’s financial planning and preparation for the possibility of a ‘solo retirement’ period.”
Here are some tips for women to secure their finances during their golden years.
How Does Your Retirement Change Financially Following a Spouse’s Death?
Married couples often plan their retirement together and save together, so it’s sometimes difficult to assess how much money is available for a “second retirement” — aka “solo retirement” — without your spouse.
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If you and your spouse are already retired, the financial impact of a spouse’s death can be significant. That impact depends on various factors, including the surviving spouse’s age, sources of income and expenses you both had and your extended network.
Becoming a widow in your 60s takes different planning than in your 80s or 90s. If your network of friends and family was through your spouse, this might change upon their death, and you will need to rebuild your support network.
The two most important questions to ask after the death of a spouse are:
What Is the New Income Amount for the Widow?
If your spouse had a pension, annuity or other income sources that stopped after their death, you’ll need to adjust your budget accordingly.
For example, you can’t claim your deceased spouse’s Social Security benefits on top of your retirement benefits. If you qualify for both survivor and retirement benefits, you’ll receive whichever amount is higher. If your spouse had a pension, you might receive survivor benefits.
Some pension plans pay a percentage to the surviving spouse or may offer a lump-sum payment, reducing the surviving spouse’s income.
How Will Your Expenses Change as a Widow?
Some expenses, like housing, food, transportation and healthcare, decrease as you no longer need to provide for your spouse.
However, one-time taxes on inherited assets like IRAs, property and vehicles may exist. And other annual expenses may increase, like home maintenance and long-term care costs.
Overall, the financial impact of a spouse’s death on retirement is complex and depends on your specific circumstances. Reviewing your finances carefully and working with a financial planner to develop a new plan that addresses your “solo retirement” goals and accounts for any changes resulting from your spouse’s death is essential.
Which Extra Costs Should Women Be Prepared For During This Time?
After your spouse dies and you’ve assessed your new income, looking at any new expenses is essential. Here are some examples:
- If your spouse was responsible for home maintenance and repairs, like yard work, cleaning and more significant repairs or renovations, you might need to hire someone to perform these tasks.
- You’ll need to budget for more healthcare costs and long-term care retirement expenses, including regular check-ups, prescription medications, dentist visits and eye exams to long-term care expenses like home-care aides, assisted living fees or nursing home rehab care.
- A spouse’s death may involve various legal and administrative tasks, including estate planning, probate, tax preparation and other expenses related to settling your spouse’s affairs. You’ll also need an elder law or estate planning attorney to plan for your new need for healthcare proxies, power of attorneys, beneficiaries and updated wills and trusts.
- After your spouse’s death, your living expenses increase. Downsizing, renting or relocating to a lower-cost area may be viable options to reduce housing costs. You’ll want to intentionally age in place with home-care aides ($25 to $40 per hour) or move to assisted living, which can cost between $5,000 to $10,000 per month.
How Can Women Plan for Their ‘Solo Retirement’ Period?
Working with a financial planner is an excellent way to develop a plan that accounts for the financial changes after losing a spouse. They can help you achieve your “second retirement” goals.
Here are some steps that women should take to ensure they’re financially secure during their “solo retirement”:
- Review your retirement plan: If you have a retirement plan in place, review it to ensure it considers your current financial situation and goals, which differ from the plan you had together as a couple. If you don’t have a plan, consider creating one with a financial planner.
- Reassess your expenses: With a change in circumstances, like the death of a spouse, your expenses may change. Review your budget to reflect your current situation and adjust as needed.
- Consider your income sources: Review your income sources, like Social Security, pensions, annuities and retirement accounts. Determine if you need to adjust your budget or explore additional sources of income, like part-time work.
- Review your insurance coverage: Review your insurance coverage, like Medicare, Medigap, supplemental insurance and long-term care insurance (LTCI). Determine if your coverage meets your needs and if changes are necessary. Continue to pay your LTCI premiums, if you are an LTCI policyholder.
- Plan for long-term care: Long-term care can be a significant retirement expense, and it’s essential to plan for it. Consider your options, like in-home care, assisted living and nursing home care and determine how you’ll pay for it.
- Stay involved and connected: Maintaining social connections and staying active helps you stay mentally and physically healthy during retirement. Consider joining a community group, volunteering or pursuing hobbies and interests.
- Have a backup plan: It’s essential to have a backup plan in case of unexpected events, like a health crisis, stock market downturn or family crisis. That may include having an emergency fund or exploring insurance options.
Overall, planning for a “solo retirement” period requires careful consideration of your financial situation and potential risks.
Working with a financial planner helps you develop a plan that considers these factors and enables you to achieve financial security during your retirement years as a solo ager.
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This article originally appeared on GOBankingRates.com: I’m a Financial Expert: 7 Ways Every Woman Can Prepare for a ‘Second Retirement’
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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