Averting a financial crisis after the loss a spouse
Follow these steps to develop a strategy to facilitate your financial transition before the loss of a spouse.
Few events are more painful than dealing with the loss of a spouse. This extremely difficult life event is compounded when a surviving spouse is unaware of the couple’s financial situation. According to the Michigan Department of Insurance and Financial Services, there are certain steps that one can take to minimize this financial impact.
Get organized – Gather your important documents and financial records. Keep these documents in a place that is accessible to both of you. Don’t forget to include online accounts, user IDs and passwords.
Share information – Review and discuss documents and financial records. It is imperative that both spouses understand the purpose and importance of the information. Most importantly, include all streams of income and assets as well as debts.
Budget for one income – Consider what will happen if one spouse dies after retirement. Plan a budget based on one income to be prepared. Examine the budget closely to see what should be reduced, eliminated, or increased.
Consider working longer – Delaying Social Security benefits for whoever earns the higher income can be a good strategy for increasing retirement income. If the higher-earning spouse passes away, the surviving spouse can claim those benefits as if they were his or her own.
Review insurance policies – This is not the time to leave things to chance. Research a variety of life insurance options to figure which one is best for your situation. For instance, a joint-life annuity option may be a better choice than the single-life option. Other insurance to think about are long-term care insurance, homeowner or renter insurance, and vehicle insurance. Long-term care insurance will help cover expenses if you can no longer care for yourself. Homeowner and renter insurance will cover the cost of property loss. Vehicle insurance will help defray the cost of replacing or repairing a vehicle that has been damaged in an accident or by vandalism.
Michigan State University Extension educators urge couples to develop a strategy now, to facilitate the financial transition caused by the loss of a spouse. Information on budgeting and other money management topics can be found on the MImoney Health website.