How Financial Planning Changes for Widows

by | Jul 26, 2023 | Financial Planning

Following the death of a spouse, you may find yourself balancing grieving with being overwhelmed by new or expanded financial responsibilities. Navigating those obligations can seem discouraging, especially while you are contending with your emotional loss. This guide will give you a starting point for how your financial plan should adapt to your new reality.

Widows Typically Have a Greater Need for A Compassionate Financial Partner

Financial decisions that you make quickly in a time of emotional upheaval may not serve you in the long run.  A compassionate financial advisor will understand this risk and help you adapt your plan – at your own pace. Your advisor should help you make financial decisions methodically and ensure you understand how each change might impact your future.

If you don’t have a financial advisor, or your current financial advisor does not meet your needs, look for someone compassionate and experienced. You should feel comfortable discussing all aspects of your emotional and financial life with them. You should feel confident that you understand the advice you receive, and you are not being pushed into decisions you are not ready to make while you are still grieving.

Widows Often Have Lower Income

If your spouse was lost prior to your own retirement, you may have to adjust your plan to account for lower income. This could mean other changes in your life such as lowering your expenses, drawing from investment accounts, or spending life insurance proceeds to maintain your standard of living. You may also find that you have less money each month to save for future goals such as retirement.

If you were already retired when you lost your spouse, your income is also likely to decline.  Social Security survivor benefits are typically the higher of the two payments you were receiving, and you lose the lower payment. Reduced income in any stage of life can be a significant hurdle to overcome, but an experienced financial advisor can help you find a solution that works for you.

Widows Face Tax Challenges

Widows can face higher tax rates when they no longer file as married filing jointly. Typically, if you were married filing jointly before your spouse passed, you can continue that designation the year they die. Then, you can claim the qualifying widow(er) designation for two years. This filing status allows you to claim the highest standard deduction amount. After that, if you remain single, you must begin filing as single, which can drastically impact your tax expenses each year.

Your tax filing status can also impact the provisional income calculation which determines how much of your Social Security benefits are subject to tax. An experienced financial advisor with access to a team of tax, legal, and investment professionals can assist in adjusting your financial plan to account for higher tax liability.

Widows May Have a Different Tolerance for Risk

A significant part of investing your money is determining your risk tolerance. This describes your willingness and ability to accept the chance of investment losses in exchange for the possibility of profits. After the death of a spouse, you may find that your risk tolerance has changed.

With changes to their income, taxes, and life, many widows find they have a lower tolerance for investment risk. On the other hand, you may find that you need to take more risks with your investments to achieve the growth or income you need. Your advisor can work with you to understand your new feelings toward risk, discuss your options based on your circumstance, and adjust your portfolio if necessary.

Widows Often Have Life Insurance Proceeds

If your spouse had life insurance, these funds can be a vital ingredient in maintaining your standard of living. There are several choices for how to use life insurance proceeds – maintain as cash, pay off debt, purchase an annuity, or invest the funds in the markets. Each of these options has its own benefits and drawbacks.

An experienced financial advisor can work with you to determine your current and future needs. Then, they can help you determine an investing plan for life insurance proceeds that meets your retirement needs. This could mean that you are more conservative with the proceeds while you are getting your feet back under you and going through the grieving process. Later, you may feel more comfortable making decisions that will allocate your assets for more potential growth in the future.

Widows Have New Estate Planning Considerations

After a spouse passes, you may need to overhaul your estate plan. Along with deciding who should now receive your assets, you must name those beneficiaries, update your will, and retitle assets that were held jointly. This process can be confusing, but a trusted advisor can help you every step of the way.

Losing a spouse can impact nearly every aspect of your financial life. But if you find a financial advisor that you trust, they can guide you through the process of updating your financial plan. With a comprehensive plan and a compassionate financial partner, you can approach your financial future with confidence. Navigating this next chapter of life is not easy and – quite frankly – feels impossible at times. But you can get through it working with someone that understands you, respects your needs, and has your best interest in mind.

Partner with Brookstone Wealth Management

Brookstone Wealth Management can help you develop or adjust your financial plan after the death of a spouse. Our experienced and compassionate advisors focus on coaching, teaching, and mentoring our clients to ensure they are comfortable with every decision.

Our comprehensive wealth management plan, Financial Fingerprint™, is quick to assemble, easy to understand, and simple to modify as your circumstances change. This nimble program accounts for the most important aspects of your financial life including managing your investments, planning for retirement, and includes reminders to update your estate plan when things change.

Contact us to get started.