That phrase ‘till death do us part’ slips under the radar when we take our marriage vows. We’re too busy looking lovingly at each other to wonder if ‘happily ever after’ will be as long we hoped. Yet life, even for the young and seemingly invincible, can have other plans. Losing a spouse is sadder, harder and lonelier than we could ever imagine. In fact, it’s considered one of life’s most stressful events, affecting everything, not least our finances. And it disproportionately affects women.
Women live longer than men. In fact, on average, women can expect to outlive their husbands by 10 to 15 years. This results in a significant financial challenge as women age alone. One challenge is adjusting to a lower level of income as sources are adjusted upon the death of a spouse. Reports indicate that women on average, regardless of wealth status, experience a decline of household income of 40% within five years. Loss of government benefits, reduced survivor pensions and higher taxes due to not being able to split income in retirement all contribute to a significant reduction in income. Yet when was the last time you stress tested your retirement plan for a survivor scenario? So many times we plan for both people to live to 95, or 100. What if you end up facing the financial challenges of being retired and single? Only a financial plan scenario run before that circumstance arises will allow you to take steps to protect yourself and have the financial resources you need to avoid a 40% decline in income should you find yourself on your own again.
Becoming empowered before you’re suddenly single can help you prepare for that decline if not mitigate it. Even if you’ve had a hand in family financial decision-making, you are not completely free from that springboard into the financial realities of life as a widow. The time to get proactive about your financial future is now.
While we can never prepare for losing a spouse, we can put steps in place that would ease the financial burden their absence would bring. Beyond the importance of stress testing your retirement plan, there are some important questions to ask ourselves while our spouse is still beside us:
- If needed as a caretaker during final months of an illness, would we need to leave the workforce?
- Would loss of a partner transform a 2-parent household to more difficult and costly solo parenting?
- Is there enough life insurance or savings for the partner left behind? Not just during our working years, but in retirement as well.
- Do you have contact information for your financial adviser, banker, accountant, insurance agent, and lawyer and are you current on the plans that have been made?
- Do you both have a will? Is it up to date?
- Where are important documents and the safe-deposit key?
Have a plan in case something happens to your partner. Losing a spouse leaves a gaping hole in your life. Focus on what can’t wait, like funeral costs, household bills and changing ownership as needed on accounts so you can access them, and leave major decisions like whether or not to sell your home (if you can afford to wait), and/or relocating , on the back burner. Take your time. When you are ready to start looking towards your future, it can help to include big decisions as a part of a financial plan. Before making big commitments, understand the impact those decisions will have on your future income, and your taxes. Big decisions and sudden overspending can affect your finances – and not in a good way if those decisions aren’t well planned.
Plan and protect your income in the event of widowhood. A new budget, a focused financial plan can take some getting used to, but then everything about a new life does.
 Statistics Canada. Death of a Spouse: The Impact on Income for Senior Men and Women. 2009