How to Prepare Financially When Losing a Spouse

It is a topic that few of us want to discuss, but it is a reality of life for anyone who is married or plans to get married, especially for seniors living in retirement.  We may have to cope with the difficulty of becoming a widow/widower.

According to the American Community Survey, 5.8% of adult Americans are widowed. Therefore, approximately 15 million widows and widowers are in the U.S., about three-fourths of whom are women.

Not surprisingly, widowhood is most prevalent among older adults. Seven in ten Americans who were widowed last year were age 65 or older, according to the U.S. Census. The longer one lives, the more likely he or she will experience the loss of a spouse.  Among those Americans 75 years or older who have ever married, the Census reports that 58% of women and 28% of men have experienced the death of a husband or wife in their lifetimes.

It is emotionally difficult to think about the loss of a life partner, but it is important to contemplate the financial consequences if he or she passes away.

“Widows and widowers, beyond emotional loss, contend with a host of financial challenges in the aftermath of losing a spouse,” says personal finance writer Shelly Gigante. “These include paying for medical bills left behind, covering funeral costs, and contacting insurance companies. And an uncomfortable truth is that many also face a drastically different financial future.”

Many seniors are unprepared for a sudden personal financial setback. For example, a survey from E&Y indicates that the COVID crisis had a major impact on the priorities of Americans. E&Y found that nearly half of consumers are now planning to save more money as a protection against future unexpected economic crises. It is a sobering admission that people were unprepared for a sudden economic setback and have been forced to rethink their financial priorities.

The reality is that millions of American families are one significant life event away from financial disaster.  For seniors, this is especially troublesome. Most are beyond their employment years and simply cannot work their way out of a major financial setback.

Retirees need to evaluate their overall financial condition and carefully assess the value and allocation of their assets, including investments and any tangible and real properties that they own. Are the assets helping to achieve their retirement funding goals?  Nobody wants the sudden loss of a loved one to cause a hasty or uninformed decision.

“Preparing for widowhood is not a ‘fun’ financial task,” says the Lifetime Financial Growth blog. “But most of the preparation is fundamental financial management that ought to be done anyway.”

The asset evaluation should include the obvious items:

• Stocks
• Bonds
• Real Estate

But it should also include less-obvious assets:

• Art
• Jewelry
• Life Insurance

Many seniors are familiar with unlocking value from real estate, such as taking a reverse mortgage on a home or creating a line of credit that can be tapped at any time. But the last item above surprises many seniors.  An unwanted or unaffordable life insurance policy can be sold to a third-party investor as a life settlement for a lump-sum cash payment that is less than the death benefit but more than the cash surrender value.

A life insurance policy is considered personal property and therefore, can be bought and sold just like a car or house, or any other possession.  Policy owners in 2021 who qualified for a life settlement received 7.8 times more money than the cash surrender values offered by the life insurance company, according to a Life Insurance Settlement Association survey of its members.

The life settlement industry is highly regulated and growing steadily every year.  Seniors who feel financially unprepared for widowhood and own an unneeded life insurance policy should explore and consider the life settlement option in advance of an unexpected loss of a spouse.

For more information on life settlements or to receive a free appraisal of a life insurance policy, please visit www.welcomefunds.com or call 877.227.4484.