‘Til Death Do Us Plan

Mary and Dave Swan were happily married and looking forward to retirement. They had saved diligently and when Dave was offered a package to retire early, they were in great shape to be able to accept. Dave left his company, and he and Mary started enjoying their new life, being more active, spending time with friends and family, and planning an extended trip to experience a different culture.

Before they could leave Dave was diagnosed with a serious medical problem and passed away a short time later.

What Mary did not realize is that her troubles were only beginning.

As she began working settling the affairs of her late husband, she discovered that in addition to losing her life partner, her income was set to drop significantly. Gone were most of Dave’s government retirement benefits, as was a significant portion of Dave’s pension from work, and now that Mary can no longer income split, her taxes were set to rise!  Mary was suddenly together with other widows who report a 40% drop in average income 5 years after losing their spouse.  With hindsight, there were some things Mary wished they had done differently.

Like many people, once they retired, Mary and Dave decided they didn’t need any life insurance.  They had paid off their mortgage, the kids were grown, and quite frankly, they didn’t want the expense of the premiums now that they were on a retirement income.  What they failed to consider was the need to replace lost income for a survivor should one of them pass early on in their retirement years.   A loss of up to $20,000 per year in government benefits, a 40% drop in pension income for a survivor, and now higher income tax bills, are a significant hurdle to overcome.   Keeping some life insurance to replace income “just in case” can make a significant difference in a survivor’s ability to maintain their lifestyle for their lifetime.

If there was just one thing that Mary and Dave did before they retired that would have potentially identified the need to keep some of their life insurance, it would have been to Plan Single.  While we always want to plan together, good financial planning strives to find the best outcomes once the biggest risks are considered.  For couples making the retirement decision, a “big risk” is what if we don’t both live to 95, or 100?  What if two, is now suddenly one?

Decisions about whether or not to keep some life insurance, when to retire, when to start receiving government retirement income benefits, how much to withdraw from different accounts to generate income,  or what income sources to use and when, can all be impacted when you run the Plan Single scenario.  Central to the Plan Single philosophy is to look at it both ways.  Plan together, for that is the vision for your future and that is what you have been working so hard to achieve.  But good financial planning strives to find the best outcomes once the biggest risks are considered. Some of those risks are market volatility, disability, divorce, and death.

As you make plans with your partner you will talk about what you most want to do, when you can do it, and how you will afford it. Then think about what could change financially if one of those big risks materializes. How do you incorporate those scenarios into your plan to create the best outcomes? Maybe it means taking a trip a little sooner, or stress testing benefits elections to see if anything significant changes with the change in circumstances. Or possibly, as in Mary’s case, perhaps an insurance review is in order.

We all dream about a wonderful future with our partner. Plan Single reminds us to enjoy today, but make sure to take care of ourselves and our loved ones if one of life’s challenges happens along the way.

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