Financial Planning for Young Widows/Widows with Young Children
The premature and sudden death of a spouse is something many younger couples don’t typically think about, much less plan for. Although early death is uncommon – the average age of widows is 55, and only about 6 percent of widows or widowers are under the age of 44 – the unfortunate reality is that it does happen. Life is fragile, and tomorrow is never promised.
Young widows and widowers could have an even more difficult road ahead of them than those who are older, because the young widows/widowers may still have children at home to care and provide for. They may also have other considerations that older widows and widowers may not have (or may have already dealt with in the past), like saving for their children’s college education, paying for weddings or planning for long-term care.
Having to cover financial expenses without the income of the deceased spouse can make things even more difficult. A husband or wife can expect to continue incurring about 80 percent of the monthly expenses they had before their spouse died; meanwhile, about half of those households will also lose approximately 50 percent of their household income with the loss of a working spouse.
Many young people reach out to a financial advisor after their spouse passes away, but financial planning firms can be more beneficial if dealt with before a loss happens. Estate planning should be part of a comprehensive financial plan. It can't hurt to be prepared.
If you live in the Houston area, below are some of the ways financial planning firms in Houston can help.
Tips for Young Widows and Widowers
Even when a death comes after a long battle with illness, many spouses say they aren’t financially prepared for the death of their spouse. Regardless of whether it’s the husband or wife who survives, he or she is going to have to face challenges, questions and uncertainty, and the surviving spouse has to be prepared to take over the managing of finances.
It’s important to take time to grieve, of course, but there are certain things, especially with regard to legal paperwork and financial decisions, that shouldn’t be put off for long.
Following the death of a spouse, here are some important things you should do as soon as possible:
- Obtain a death certificate. You’ll need to send copies of a death certificate to financial institutions, insurance companies and any other organization that holds an account in your spouse’s name, so it’s wise to have at least two dozen copies made, and always keep a copy for your own records.
- Organize financial documents. Hopefully, you’ve already been keeping important financial documents together in a safe place, but if not, now is the time to gather things like bank and brokerage account information, insurance policies, loan paperwork, credit card account information, mortgage statements, retirement plan information and tax returns from previous years, among other things. You’ll also need your marriage certificate, vehicle titles, wills and safe-deposit box keys.
- File for Social Security benefits. If you’re over the age of 60, or you have children under the age of 16 living at home with you, you may be entitled to Social Security survivor’s benefits. Social Security also offers a very small amount ($255) for funeral expenses. To learn more about Social Security survivor’s benefits, click here. You may also be entitled to additional funeral benefits if your spouse was a veteran.
- Pay the bills. This may seem like a no-brainer, but it’s easy – especially following the emotional loss of a loved one – to treat the accumulating stack of mail with an "I’ll deal with it later" attitude. Take a few minutes each day – or an hour or two each week – to sort through and prioritize bills and statements. This includes accounts that only name your spouse. Make payments to stay current so you don’t wind up having to pay penalties and late fees.
What Not to Do
Just as important as what you should do is what you should not do. Here are a few things to consider:
- Don’t make any major financial decisions right away. Most experts agree that you should wait at least six months – it’s even better if you can wait a year – before doing anything drastic, like putting your home on the market or making any big purchases. This is a great time to ask for advice from a financial advisor, who can help, especially until you’re ready to make more thoughtful, intentional investment decisions.
- Don’t go on a spending spree. It may be tempting to use the windfall from a big life insurance payout for some alone time to collect your thoughts, but remember that the purpose of life insurance is to replace the lost income that results from the death of a spouse. Many of the monthly expenses won’t change much, if at all (think housing, utilities, groceries, transportation, childcare, tuition). If you spend lavishly right away, the death benefits that are intended to help you maintain your lifestyle won’t last as long.
- Don’t be afraid to ask for help. Talk with a financial advisor. If you live in the Houston area, meet with financial planning firms in Houston. A fiduciary financial advisor can help you think about and plan for things that aren’t quite so obvious or immediate, such as how to handle benefits from your spouse’s life insurance payout so that it doesn’t negatively impact your children’s future ability to qualify for financial aid for college.
Having someone to offer assistance or guidance can take some of the pressure and uncertainty away from navigating financial issues you are unsure of or confused about, and it can give you the confidence to help get you through a difficult time and face the future.
It’s a group to which no one wants membership, but if you suddenly find yourself as a young widow or widower, a little thought and organization can save you from financial shock, or worse.