Losing a spouse is an incredibly difficult event to endure in one’s life. Because women typically live longer than men, they’re more likely to experience this loss. Of the 14.88 million widowers in the United States in 2019, 77% were women.
Not only is this an emotionally-wrenching situation, many widows that left the financial dealings to their spouse suddenly find themselves faced with making many crucial financial decisions.
If you have found yourself in this position, it may seem daunting but remember to take it one day at a time. Spend an hour or two each day tackling the paperwork- you don’t have to do it all at once. Keep a daily routine, take care of yourself, and remember to take time off.
Organize all of your documents
First, create a filing system for important information and documents. Make sure it’s something that will work for you.
Categorize all of the documents you have, including bank statements, bills, credit card statements, estate documents, tax documents, investments, insurance, and any other assets. Organizing the different categories into different colored folders can be helpful. You’ll need all of these papers later.
Next, make sure the funeral director has notified the Social Security Administration of your spouse’s death and ordered five to 10 copies of the death certificate. You’ll need these for tasks such as retitling the mortgage and financial accounts.
Find a financial planner you can trust
A financial planner will work with you to assess your current financial situation to craft a strategy that will help you transition into this new stage of life.
It’s best that you find a professional that you trust. After all, it’s an intimate relationship and much like a therapist, your financial advisor will know your personal details.
Notify your insurance company
Whether you were covered under your spouse’s work policy or had your own, notify the company of the death. You will also need to inform insurance agents for your auto, homeowners, liability, long-term care, and any other policies you have.
Contact your spouse’s life insurance agent to file a claim. Check for other possible life insurance policies issues by your spouse’s employer, mortgage company, credit company and professional association or union.
Apply for survivor benefits
You may need to locate a combination of the following documents belonging to your spouse in order to collect death benefits:
- Birth certificate
- Social Security number
- Marriage license
- Military discharge papers (if applicable)
- Bank statements
If your spouse served in the military, contact the Department of Veteran Affairs. You may be eligible for medical care, commissary exchange, and veteran’s mortgage life insurance.
Consider your Social Security options carefully. You should speak to your advisor before deciding what your plan will be.
You can apply for Social Security retirement benefits as early as age 62, but it may be advised that you wait. Your monthly Social Security check will typically be three-quarters larger if you claim at age 70 instead of 62. The longer you wait, the more you will receive.
You can receive money from your own retirement benefit or the survivor’s benefit. If you’re still working, or if your own retirement benefit is higher, you can receive the survivor benefit first and then switch to the higher benefit at age 70.
Or, if your survivor benefit will be larger, you can collect your retirement benefit at age 62 and switch to the survivor benefit at age 66.
Taking your retirement benefit early will not reduce the survivor benefit. However, taking the survivor benefit before the age of 66 will reduce the amount you can claim. If you wait until age 66, you can claim the full survivor benefit.
If you are over the age of 70, you should switch to the survivor benefit if it’s larger than your retirement benefit.
If you are the beneficiary of your spouse’s Individual Retirement Account (IRA), then you are eligible to receive their benefits.
In this case, you have three options:
Cash it in. If you decide to cash in the IRA, you won’t face any penalties, but you should consider your tax bracket. You’ll pay income taxes on the amount withdrawn, and cashing in a large IRA could mean that a significant percentage of it will go straight to federal taxes. You may be better off withdrawing money as you need it instead of cashing it in at once.
Treat the IRA account as your own. You can either retitle the account into your name or roll the inherited funds into your own IRA account and update the beneficiaries. This is a good idea if you are younger than 70½ and don’t need the money right away. You will not be required to take minimum withdrawals until you’re 70½, so the account can continue to grow tax-free until then. If you choose this option, there is a 60-day time limit to do so.
Treat yourself as the beneficiary rather than treating the IRA as your own. This may be your best option if you're either younger than 59½ or older than your spouse. Your required minimum distributions (RMDs) are determined by your spouse's age at the time of their death.
If your spouse died after their RMDs began, because they were over age 70½, you must take distributions based on which is longer:
- Your deceased spouse’s life expectancy
- Your own single life expectancy
If your spouse died before their RMDs began, you can defer distributions until their RMDs would have started. You can take withdrawals if necessary and no tax penalty will apply if you’re younger than 59½.
If your spouse was already collecting retirement benefits, the Social Security notification will trigger a one-time $255 death benefit and terminate your spouse’s monthly benefits. If you had also already begun collecting your own benefit and it was lower than your spouse’s benefit, it will be increased to match.
You must formally notify banks and other financial institutions of your spouse’s death. The requirements to do so may vary among institutions, so this can be particularly frustrating.
Don’t feel pressure to do this immediately. You should wait to change the names on credit cards and joint accounts for a year or so in case checks arrive payable to your spouse.
Review financial obligations
Cancel any subscriptions or services that pertain only to your spouse. Then, create a list of monthly expenses and income.
Include income from your job if you still work, Social Security benefits if you’ve retired, or IRA distributions.
Include expenses that will continue, including contributions to retirement accounts if you haven’t retired, credit card payments, utility bills, rent or mortgage, insurance, household expenses, and any other bills that you can find.
Your trusted advisor will use this to help you craft a budget. If you spend more on expenses than you receive in income, you may have to use your savings accounts to maintain your current lifestyle. However, if you don’t want to tap into your savings, you will likely need to make lifestyle changes that will help reduce some of your expenses.
Postpone major irrevocable decisions during the first year
Don’t rush the process and avoid making big decisions. Early in the grief process, you will be in shock and prone to making big decisions that you may regret later on.
You are in a vulnerable position, but try to avoid making life-altering decisions such as selling your home, lending money to family members, or putting your money into investments you don’t understand. This isn’t the time to act impulsively. It’s better to take your time and consider all your options before making any major changes.
If you don’t feel confident making some decisions alone, confer with your trusted advisors and focus on the most immediate financial tasks.
Consider joining a local support group or talking with a counselor. The Modern Widows Club is a national organization that offers support and resources through both virtual and community chapters.
Our Confident Women’s Club will teach you to live confidently through regular events, meetings, and workshops and help give you a sense of control over your life and finances.