Ask an Advisor: I’m 78 and recently widowed. How can I adjust my financial plan to navigate this new phase of life?

Ask an Advisor: I’m 78 and recently widowed. How can I adjust my financial plan to navigate this new phase of life?

Losing a spouse is one of the most challenging experiences one can face. The emotional toll is immense, and the financial implications can feel overwhelming, especially when you’re already navigating the complexities of retirement. As a Certified Financial Planner, my goal is to help you adjust your financial plan during this difficult time, ensuring that your financial future remains secure and aligned with your new circumstances.  Here’s an outline of basic steps you should take if you find yourself in this position.

Take the Time to Grieve Before Making Major Financial Decisions

First and foremost, allow yourself time to grieve. The period immediately following the loss of a spouse is not the time to make hasty financial decisions. While there are some tasks that need to be addressed in the short term, such as notifying financial institutions and ensuring that bills are paid, most major decisions can wait. It’s important to take the time you need—whether it’s several months or a year—before making significant changes to your financial plan. This gives you the emotional space to process your loss and approach your finances with a clear mind.

Review and Update Your Financial Accounts

One of the first practical steps you should take is to review and update your financial accounts:

Beneficiary Designations: Check the beneficiaries on your retirement accounts, life insurance policies, and other accounts. Make sure they reflect your current wishes. This is a crucial step, as these designations can override your will.

Joint Accounts: If you had joint accounts with your spouse, you’ll need to decide whether to keep these accounts open, close them, or transfer them into your name alone. For bank accounts, this often involves providing a death certificate to the financial institution.

Ownership Titles:  Ensure that ownership titles for properties, vehicles, and other jointly owned assets are updated. This may involve retitling assets in your name or updating the deed to reflect your sole ownership.

Reevaluate Your Income Sources

Your income picture may change significantly after the loss of your spouse, so it’s crucial to reassess where your money is coming from and how it meets your needs:

Social Security Benefits: As a widow or widower, you may be eligible for Social Security survivor benefits, which could replace your spouse’s Social Security income. It’s important to understand your options. Depending on your situation, you may be able to switch to survivor benefits if they are higher than your own benefit.

Pension Benefits: If your spouse had a pension, determine whether you are eligible for survivor benefits and what the payment options are. Some pensions offer a lump-sum option, while others provide monthly payments.

Investment Income:  Review your investment portfolio to ensure it’s generating the income you need. You may want to shift to more income-focused investments, such as dividend-paying stocks or bonds, while still balancing the need to preserve capital.

Adjust Your Budget and Spending

With the change in household size and possibly income, it’s important to adjust your budget to reflect your new reality:

New Expenses:  Consider any new expenses that may arise, such as needing to hire help for household tasks that your spouse previously managed, or increased healthcare costs.

Discretionary Spending:  Some expenses, like travel or dining out, may decrease, while others, like social activities or hobbies, may become more important for your well-being. Reevaluate these areas and adjust your spending plan accordingly.

Emergency Fund: Ensure that your emergency fund is fully stocked, ideally covering 6-12 months of living expenses. This fund is crucial for dealing with unexpected costs without having to dip into your retirement savings.

Reassess Your Investment Strategy

At age 78, your investment strategy should be aligned with your goals and risk tolerance, which may have changed following your spouse’s passing:

Risk Tolerance: Your spouse may have been more comfortable with certain levels of risk. Now is the time to reassess your own risk tolerance and adjust your portfolio accordingly. A more conservative approach may be appropriate, especially if preserving your assets is a top priority.

Income Generation: Focus on income-generating investments, such as dividend-paying stocks, bonds, or annuities, to ensure a steady cash flow. This approach can help provide the stability you need in this new phase of life.

Diversification: Continue to maintain a diversified portfolio to manage risk and protect against market volatility. Diversification helps spread out risk across different asset classes, reducing the impact of any single investment’s poor performance.

Update Your Estate Plan

Updating your estate plan is a critical step after losing a spouse:

Will and Trusts: Review and update your will and any trusts to reflect your current wishes. This may involve changing beneficiaries, updating the executor of your estate, or revising how your assets are to be distributed.

Power of Attorney and Healthcare Proxy:  If your spouse was named as your power of attorney or healthcare proxy, you’ll need to appoint new individuals to these roles. Consider someone you trust implicitly who can make decisions on your behalf if you are unable to do so.

Gifting Strategies:  If charitable giving or leaving a legacy for your heirs is important to you, now is a good time to revisit your gifting strategies. Whether through direct gifts, charitable trusts, or other vehicles, a well-structured plan can help you achieve your philanthropic goals while potentially offering tax benefits.

Seek Professional Guidance

Navigating financial changes after the loss of a spouse can be complex, and it’s crucial to seek guidance from professionals who can help:

Financial Planner/Advisor: Working with a Certified Financial Planner like myself can provide the clarity and confidence you need as you navigate this new chapter. Together, we can review your entire financial picture and make adjustments that align with your goals and needs.

Tax Advisor:  Not to be confused with a tax preparer, a tax advisor can help you understand the tax implications of your new financial situation, including changes in filing status, income tax brackets, and potential strategies to minimize taxes.

Estate Attorney:  An estate attorney can assist with updating your estate plan, ensuring that your assets are distributed according to your wishes and that all legal documents are in order.

Plan for Long-Term Care

As you age, planning for long-term care becomes increasingly important. This is a time to consider how you’ll handle potential healthcare needs down the road:

rLong-Term Care Insurance:  If you have long-term care insurance, review your policy to understand the coverage it provides and how it fits into your overall plan.

Medicare and Medicaid:  Familiarize yourself with your Medicare benefits and consider whether Medicaid planning is necessary, particularly if you anticipate needing long-term care. Medicaid planning can be complex, so working with a knowledgeable advisor is essential.

Living Arrangements:  Consider whether your current home is suitable for aging in place. You may want to explore options such as downsizing, moving to a senior community, or modifying your home to accommodate potential mobility challenges.

Prioritize Self-Care and Emotional Well-Being

Finally, as you navigate this new phase of life, it’s essential to prioritize your physical and emotional well-being. Grief can take a toll on your health, so make self-care a priority:

Stay Active:  Regular exercise can boost your mood and help you maintain your physical health.

Social Connections: Stay connected with friends, family, and community. Loneliness can exacerbate grief, so it’s important to surround yourself with supportive relationships.

Pursue Hobbies:  Engaging in hobbies and activities you enjoy can provide a sense of purpose and joy.

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Losing a spouse is a profound and life-altering event. While the financial implications can feel overwhelming, taking the time to thoughtfully adjust your financial plan can provide stability and peace of mind. Remember, you don’t have to navigate this journey alone—lean on trusted advisors, like myself, and your loved ones for support as you move forward. Together, we can ensure that your financial future remains secure and aligned with your goals in this new chapter of life.

For more personalized advice and support, feel free to reach out to me by visiting my website at www.masudalehrman.com.  I’m here to help you every step of the way.

 

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This article was originally published on Wealthtender and is intended for informational purposes only and should not be considered financial advice. You should consult a financial professional before making any major financial decisions. Wealthtender earns money from financial professionals, which creates a conflict of interest when these professionals are featured in articles over others. Read the Wealthtender editorial policy and terms of service to learn more. Wealthtender is not a client of these financial services providers.

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