The financial challenges faced by retirees who have lost a spouse or partner can be significant, particularly for elderly women who are less resilient to deal with the challenges. Housing expenses, which are typically the largest living expense for retirees, often continue after the death of a spouse. As a result, the survivor’s retirement income may no longer be enough to support their lifestyle compared to when both partners were alive. It is important to understand how all sources of retirement income will change when one spouse or partner passes away and to plan accordingly.
One of the main reasons retirement income drops when a spouse or partner dies is due to changes in Social Security benefits. For married couples, the survivor’s benefit may increase to the amount of the deceased spouse’s benefit if it is greater than their own, but only one Social Security benefit continues after a spouse dies. Pension income may also be affected, with joint and survivor annuities cutting the income in half when the pensioner dies. Any income from working that the deceased spouse was earning will stop, leaving the survivor with potentially less income to rely on.
To address these challenges, retirees can take steps to maximize the survivor’s income while also managing living expenses. Strategies include considering 100% joint and survivor annuities, using conservative methods for withdrawing funds from retirement investments, converting traditional retirement accounts to Roth accounts, and not tapping into investments to generate retirement income while both partners are alive. Keeping life insurance in force and considering maximizing home equity by paying off the mortgage can also help provide financial resources for the survivor.
Managing living expenses is also important, with housing often being the largest expense for retirees. Downsizing to reduce housing expenses may be a helpful strategy, as well as examining other living expenses such as car expenses, travel, entertainment, and support to family members. Planning ahead and making financial preparations can help alleviate some of the emotional stress experienced by survivors after the death of a spouse or partner. It is important to ensure that the survivor will be financially secure and cared for in the future, demonstrating love and support during a difficult time.