Losing a spouse is an emotional experience, but it can also create significant financial changes that surviving spouses may not be prepared to handle. Income may change, certain expenses may remain, and decisions about retirement accounts, Social Security, insurance, taxes, and estate plans may suddenly become much more important.
Planning for these possibilities before they happen can make an incredibly difficult transition a little easier.
Your Household Income May Change
One of the first financial considerations is determining what income will continue after a spouse’s death. Some sources of income may stop, while others may continue or change. Social Security survivor benefits, pension benefits, life insurance proceeds, and retirement account distributions can all play a role in the surviving spouse’s financial picture.
Understanding these potential changes in advance can help you determine whether your current retirement income strategy provides enough flexibility.
Expenses May Not Simply Be Cut in Half
It’s easy to assume that losing one spouse means household expenses will automatically decrease by half. In reality, many costs remain relatively unchanged. Housing, property taxes, utilities, insurance, and other expenses may continue even though the household now has only one person.
Healthcare costs and other expenses may also change over time. Planning for these possibilities can help prevent a surviving spouse from being caught off guard.
Retirement Accounts and Taxes Matter
The death of a spouse can also affect how retirement accounts are handled and how much the surviving spouse may owe in taxes. Beneficiary designations determine who receives many retirement and financial accounts, making it important to review them regularly and ensure they reflect your wishes.
A surviving spouse may also face changes in their tax situation. For example, the loss of one spouse can eventually result in a different filing status, potentially affecting the amount of taxes owed.
Prepare Before You Need To
No one wants to imagine losing their spouse, but preparing for unexpected situations is an important part of comprehensive financial planning. Couples should know where important financial documents are located, understand their sources of income, review beneficiary designations, and make sure their estate planning documents are up to date.
It can also be helpful for both of you to participate in financial planning conversations. If one spouse typically manages the household finances, the other should still understand the basics of the family’s financial plan and know who to contact with questions.
Regular financial planning appointments can help you prepare for more than your expected retirement. They provide an opportunity to review your plan and consider how it might hold up if circumstances change unexpectedly.
Remember to attend regular financial planning appointments with us so we can help you prepare for a variety of unexpected situations. Taking time to plan today can help provide greater financial confidence and clarity for you and your loved ones in the future.
