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Helping Widowed Clients: Considerations for Advisors Working With Grieving Women

Life expectancies for both men and women are on the rise, but as the population ages, the number of widowed retirees continues to increase. Nearly a quarter of people 65 and older are widowed, according to the Census Bureau, and well over 11 million of them are women.

Given that they outlive men by an average of five to eight years, married women retiring today can expect to spend at least a few years without their husbands. With higher health care costs, lower savings and a likely need for long-term care, it can be tough to plan for those years financially.

Even when they inherit significant assets, widows are often thrust into unfamiliar territory as they organize assets and manage estates – all while grieving, making funeral arrangements and tending to legal affairs.

With these challenges in mind, any advisor working with retired couples should know how to help widows secure their financial futures. Myriad decisions must be made, and even financially savvy survivors will need your help to adjust their plans.

Having the conversation

As much as widows will need your help after their spouses’ deaths, the earlier they plan, the better.

“People are reluctant to plan for a spouse’s death, but part of our role is to walk them through contingencies,” says Jana Lisle Parham, senior vice president of wealth management for UBS Wealth Management. It may be an uncomfortable conversation, but it will provide for sounder strategies and much-needed piece of mind.

To that end, it’s critical to involve both members of a couple in the retirement planning process from the get-go.

“One spouse tends to be much more involved in finances than the other, and in the worst-case scenario, that’s the spouse who passes away before making a plan,” says Michelle Herd, senior client advisor with TFC Financial. “The gap in understanding leads to some very stressful situations, but when someone needs help getting up to speed, advisors can play a huge role.”

Taking stock

Whether they’re prepared or not, recently widowed clients will need to inventory several assets, income streams and obligations. There may be multiple life insurance payouts and annuities for which to account, as well as pension-survivor benefits.

There will also be an immediate change to a widow’s total household Social Security benefit in most cases.

“As a widow, you may have been receiving benefits off your spouse’s record,” says Herd. “The downside is now there will only be one income. The upside is you’ll get 100 percent of the bigger benefit.”

Widows, in fact, can collect survivor benefits as early as age 60 – albeit at a penalty. They’ll still have to wait until full retirement age to get their spouses’ full benefits, but in the meantime, they can collect early on their own at 62 – often a winning strategy for a long-lived widow.

In addition, most widows need to consider multiple qualified accounts. Under the Employee Retirement Income Security Act of 1974, a surviving spouse is the automatic beneficiary of a 401(k). The same protections don’t apply to IRAs, though, and if the spouse wasn’t specifically named as the IRA beneficiary, the funds may instead pass through probate and onto the deceased’s heirs.

Creating a new plan

Widowhood will likely require major changes to a client’s retirement plan, but decisions should only be made once assets have been accounted for and the family has had a chance to mourn.

“We always encourage people to not make immediate, life-changing decisions like selling their homes and moving,” says Parham.

Once a client has taken stock of available funds, they’ll want to consider how they should be allocated to different purposes and goals.

“We like our clients to mentally put their investments in three buckets – liquidity, longevity and legacy,” Parham says. “When you allocate money in that way, it provides a lot of clarity on drawdown strategies.”

Changing costs should be considered, as well.

“Generally, expenses will change when there’s only one spouse around, but a lot of costs won’t go down as much as you think,” says Herd. Food and other consumables won’t cost as much, but homes, vehicles and other tangible assets will still require upkeep.                                                                                                                                     

Widowhood also brings new goals, priorities and concerns.

“Oftentimes, women have different points of view on planning than men, and a newly single woman may have a different point of view from when she was part of a couple,” says Parham.

A former caretaker might want to travel, for instance, but without a partner, she might find it more important to plan for long-term care and avoid becoming a burden to her family.

Once assets, costs and goals have been laid out, it’s time to create the new budget and drawdown strategy. With all their ducks clearly in a row, clients might find they have the means to accomplish more than they thought they’d be able to in retirement – a silver lining to a tough situation.

Building and maintaining the relationship

Technical matters aside, helping widowed clients begins and ends with the relationship.

“The bottom line is you have to develop it prior to the death. It is critically important,” says Parham. “If the advisor hasn’t earned the spouse’s trust, they’re going to turn to a friend, child or family member to get the advice. There’s no context for the current advisor to play a role.”

Furthermore, education and understanding are crucial following the spouse’s death.

“The education piece with women is so important,” Parham adds. “Women tend to be more focused on financial outcomes than beating a benchmark, and that education really puts them in control.”

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