In some ways, women suffer the burden of the loss more intensely than men, according to the 2014 New York Life “Loss of a Spouse Study,” with 40% of widows reporting negative lifestyle changes the year following the loss, compared with 24% of widowers.
The financial impact was even greater: two thirds of widows experienced a significant financial change compared with half of widowers. The top five life changes following the loss were financial, with a greater percentage of widows feeling the punch of a financial blow. Here are some examples:
- Adjusting to a negative change in income level (55% of widows vs. 34% of widowers);
- Budgeting for one income (46% of widows vs. 32% of widowers);
- Cutting discretionary spending (38% vs. 24%);
- No longer being able to afford a vacation (22% vs. 13%); and
- No longer adequately saving for retirement (21% vs. 10%).
Lifestyle changes were even more dire for some widows; two in five widows without life insurance at the time of the loss (39%) reported they were struggling to meet basic needs within the first year of the loss.
Every day, advisers help prepare clients for loss, says Chris Blunt, co-president of the insurance and agency group at New York Life. First step is a needs analysis, Blunt tells PLANADVISER, which is simply sitting down with a family at their kitchen table to discuss the income needs of the household and how those needs are being met.
“Then the discussion moves to thinking through what would happen with the loss of one of the partners,” Blunt says. “Do both spouses work? What happens if there is a loss of one income? If one partner is a stay-at-home spouse, how would the responsibilities of that person be met if he or she passed away?”
The best thing an adviser can do is get the spouse involved ahead of time, says Steven Dimitriou, managing partner of Mayflower Advisors in Boston. “Even if she is not making the current decisions, at least providing an education on the financial plan and making sure she is aware of all assets, where those assets are held and whom to contact can be an enormous benefit that clears the fog of confusion and fear,” Dimitriou tells PLANADVISER.
The loss of potential income, or increased cost to cover the spouse who stays at home, is not the only consideration, Blunt notes. The cost of the mortgage, any educational costs—current and future—and retirement savings must be addressed.
Blunt recommends working with an adviser to help with financial decisions when a family’s finances are insufficient. “Ideally, it is an adviser who they already have a relationship with,” he says. “That way, there is a trusted relationship that can help alleviate some of the worry and burden.” Advisers provide a strong sense of support following the loss of a spouse, the New York Life study found, and the majority of widows continue to retain their financial adviser. Of those widows who had a financial adviser, 87% were able to rely on that adviser and 85% retained the adviser they had before the loss.
In Dimitriou’s view, the top three items on a to-do list are: update beneficiaries; identify goals; and get the right education. “You would be surprised how often a surviving spouse forgets to update beneficiary information on IRAs, 401ks, annuities, insurance policies, and so on,” he says. If these issues are not properly addressed ahead of time, they can lead to enormous issues in an estate and conflicts with wills.
Next, he says, a widowed spouse who finds herself in the driver’s seat may have very different goals for how she wants to use money and live the rest of her life. “The first thing she should do is figure out what she wants,” Dimitriou says. “Perhaps she wants to live closer to the beach than the golf course, or be closer to the grandchildren. Maybe she is not comfortable with the same level of volatility or does not need as high a monthly income.” It may sound simple, but actually identifying goals, creating a plan and tweaking a portfolio to is important and provides a strong sense of control.
Last, Dimitriou says, people tend to fear what they do not know. He recommends that women take the time to learn about their assets and liabilities, the investment products they are using and their financial plan. “The power and control they gain over their lives by doing so can be liberating and help them to better identify who should be helping them,” he says.
Planning Is Key
The financial plan a household has should ideally meet these financial needs if one spouse should die, Blunt says. “However, our survey found that this often was not the case for many Americans. In fact, approximately half of women (47%) report that they wish they had some or more life insurance to help cushion the financial impact of their loss. Many couples need to pay more attention to their financial plans before the loss of a spouse to ensure their financial security blanket is enough.”
New York Life identified a number of tasks widows wished they had done before the loss of a spouse, which can be used as lessons learned for couples or women who want to be better prepared.
Something as simple as organizing important papers—wills, insurance and bank documents—in one central location along with passwords can be helpful during a stressful time. Many widows wished they had had a good financial plan in place, with a number citing “more savings” and “more life insurance.” A financial adviser should make sure a family’s financial plan is designed to accommodate the needs if one spouse dies. Widows wished they had discussions about what would happen financially if one of the couple passed. Even though it can be an uncomfortable discussion, it is one widows wished they had had.
Most recently widowed spouses are so overwhelmed by other events that the last thing they want to deal with is another huge unknown, Dimitriou says. “If the adviser has never communicated with the spouse in the past, he has built no level of trust and personal comfort,” he points out. “That is why the majority leave the husband’s financial adviser in favor of someone that will just take care of things for her.”
The 2014 New York Life “Loss of a Spouse Study” analyzed how the loss of a spouse impacted widows and widowers from both a financial and emotional perspective. The 897 widows and widowers, widowed within the past 10 years, were age 65 and under (33%) or over the age of 65 (67%) when the study was conducted online in June by GfK’s public affairs and corporate communications division.