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Feast or Famine: Finances for Surviving Spouses

June 13, 2016

Feast or Famine: Finances for Surviving Spouses

Faced with the loss of a spouse’s income or large payments from insurance or retirement plans, surviving spouses may need help avoiding the extremes of lavish spending or fearful frugality.

The abrupt changes in the financial picture can be among the most stressful issues for widows and widowers. For younger spouses, especially those with children, the sudden and long-term loss of income can be frightening. Others may feel a false sense of confidence from lump-sum payments of insurance or retirement plans and overspend. In fact, among widows, 25 percent go through their husband’s death benefit in two months, according to 2015 information published on the Illinois Department of Financial & Professional Regulation website.

Having a thorough understanding of the household assets and liabilities before the death of a spouse prepares many survivors for going it alone – even if they relied on their spouse to do the actual bill paying and investing. Those who don’t have that knowledge beforehand face the additional stress and confusion of figuring it out during crisis or, worse yet, getting unpleasant surprises like large credit card debt of which they had been unaware.

The hindsight of knowing you should have paid closer attention provides little comfort. Help may be at hand, however, if you and your spouse had well established relationships with an attorney, accountant, financial advisor or insurance professional. If you can, meet with them together to begin building the picture of your financial situation. Bring to the meeting any documents you can, including wills, insurance policies and bank or investment statements. If your team is missing a piece, ask the advisors you have used to recommend a professional in that area, or get referrals from friends and family.

A word of warning: scam artists may come out of the woodwork soon after your spouse’s death. Some may claim to have had a relationship or account with your spouse. Ask for proof in the form of account statements and identifying information – but don’t provide any yourself. For example, a bank or investment company will have your spouse’s Social Security information. Do not give that information yourself if asked to verify. Have the caller give it to you. If accurate, confirm it. If not, do not offer to correct the information until you have received other verifying information like an account statement.

After you’ve met with your team – and it may take more than one meeting – you should have a clearer picture of where you stand for the immediate future and basic strategies for what to do with lump-sum payments. Your advisors will probably counsel against any immediate, irrevocable decisions like selling your home. Your financial advisor can help you with investing insurance or retirement fund proceeds as appropriate for your situation, and your accountant can provide strategies for minimizing the chunk Uncle Sam will take. Your attorney will guide you through any probate and estate issues. And your insurance advisor can make sure you get any lump-sum or periodic payments to which you’re entitled. Most of these professionals can also help you with Social Security claims or benefits.

If you find the number and complexity of financial decisions overwhelming, even with your team of advisors to help, consider asking a friend or family member to accompany you to these meetings. If you are unclear about a recommendation or process, ask questions and do not proceed until you are comfortable with the answers. Your advisors should provide information and guidance, but the decisions ultimately are yours to make.

Securities offered through Securities America, Inc. Member FINRA/SIPC.  Jose R. Rodriguez, Financial Consultant. Advisory Services offered through Securities America Advisors, Inc. An SEC Registered Investment Advisor, Jose R. Rodriguez, Investment Advisor Representative. Rodriguez Financial Strategies LLC and the Securities America companies are unaffiliated. Written by Securities America for distribution by Jose “Rafi” Rodriguez, Retirement Income Certified Professional®. SAI# 1104315.2

Securities America and its advisors do not provide tax or legal advice. Please consult with your tax or legal professional regarding your individual situation.