As a Financial Advisor I wear many hats. When I take on a client, my hope is that we grow old together and have a good working relationship through the years. I encourage clients to plan for and manage their financial portfolio through the years. This includes saving in their working years to be able to live comfortably in their retirement years. The retirement years not only take planning for living but also for the death of a spouse and how that affects the living spouse. This is not something that you may want to think or even talk about but is definitely something you need to plan for. Let’s look at a few areas that will be affected upon the death of a spouse.
- Social Security Benefits – If the surviving spouse has reached full retirement age, they can receive 100% of the deceased benefit but between 60 and full retirement age you receive 71.5-99% of the deceased benefit. If the surviving spouse is already receiving their own retirement benefit, they will receive whichever benefit is higher (their own or the survivor benefit). Whichever way you look at it, there is a change in income that you need to plan for.
- Change In Your Tax Status – Unless you qualify for another tax filing status, you will usually file as a single in the year after your spouse dies, which gives you a lower standard deduction.
- Where You Live – Many people feel comfortable in the home they have lived in and raised their family in, but at the time you are alone, this may not be the best option financially or physically. If you sell your home more than 2 years after your spouse’s death, you are subject to the single filer exclusion of 250,000 rather than the named exclusion of 500,000. This along is not a reason to sell a home but a consideration when making a decision. Many communities have 55 and over homes and apartments, some based on income guidelines that are becoming more popular as we are living longer but still a big decision at an emotional time.
- Your Credit Score – All joint accounts with your spouse makes the surviving spouse responsible for outstanding balances, loans, and credit cards held jointly, so be sure you are not overextending yourself as you age.
- Financial Documents – Be sure you have current POA’s (Power of Attorneys) and beneficiary designations current and updated as your life changes. A spouse can and is usually the POA and beneficiary on each other’s documents but again that changes with the death of a spouse.
As I age, so do my clients, so this is a topic I deal with in my practice. It is not my favorite hat to wear but it is one that I feel is necessary. The death of a spouse is an emotional time, but being financially secure with proper planning and documents can at least bring comfort in a difficult time in life.