- Take your time in making financial decisions after the death of your spouse.
- Make sure your loved ones know how to contact your team of trusted advocates, who can help with financial, guardianship, power of attorney, executor, and beneficiary duties.
- Maintain control of your cash until you know how much you will need to support your solo lifestyle.
Four years ago, Ginny McKinney’s husband, Dan, had a heart attack and died suddenly at the age of 62. She was 59 and had retired from her work as a medical assistant. He was on the cusp of retiring from his position as a restaurant manager, and the two were busy planning their next chapter together. In fact, his heart attack hit while they were shopping for a travel camper.
“It was so abrupt and such a shock,” says McKinney, who now writes a blog with advice for other widows. “The cardiologist said the type of heart attack he had is called a ‘widow maker.’ That it was.”
Once she got through the funeral, she knew she had to get a grip on her financial picture. “I had always deferred those decisions to my husband, but I was now alone. I realized I needed to be more proactive about my finances and investing, but it scared the heck out of me,” she says.
One-third of the women who become widows are under age 65, according to statistics from the Women’s Institute for a Secure Retirement, known as WISER, a nonprofit organization dedicated to women’s financial education and advocacy.
Losing a spouse can be shattering, emotionally and financially. Financial planning and learning to invest are one route to taking back control of your life.
Here are 8 basic steps for new widows to get a money-wise strategy in motion.
1. Evaluate your current personal and household expenses
While it’s generally wise to prioritize big decisions such as selling your house, or buying or selling investments, make sure your bills are paid in a timely fashion (you might consider setting the recurring ones up on auto-pay), and file for any death benefits from life insurance policies.
You’ll also want to review your immediate insurance needs, from health coverage to term life insurance, if you still have dependents such as young children and will need to protect them in case you die. Depending on your age, you should also review your Social Security Survivors Benefits options.
If you’re in a same-sex marriage, you are entitled to all of the same state and federal benefits as opposite-sex married couples. This means federal benefits, such as Social Security death benefits and COBRA continuation of health insurance coverage, will apply.
2. Know where your money is
In the weeks following your partner’s death, you will be required to make dozens of choices about both your private life and your financial life, so it’s critical to know what you have to work with. A hurdle for many widows is identifying where all the accounts are held. That can require some detective work to locate savings accounts, brokerage accounts, and retirement plans—and finding the proper online passwords. Pulling out your joint tax returns from the past few years is a good place to start. If you have an accountant or financial advisor on board, he or she should be able to lend a hand.
Generally, upon the death of the account owner, for example, retirement account assets go directly to the beneficiary, usually the spouse selected on the account.
- To learn more about inherited IRA rules, read Viewpoints on Fidelity.com: If you are the surviving spouse of an IRA owner.
Once you locate the accounts, you’ll probably need to change the registrations on any jointly owned financial accounts. Review and update your beneficiaries as necessary on your investment and bank accounts, as well as insurance policies. You will need to provide your financial institutions with copies of your spouse’s death certificate to change accounts from joint ownership to single ownership under your own name.
Ginny McKinney, fortunately, knew where her husband’s financial records were stored. Each spouse had retirement savings, and she was the recipient of his life insurance policy, plus they owned a 1,700-square-foot house in New Castle, Colorado.
3. Beware of making any hasty moves
“We always recommend that widows avoid making any big decisions in that first year,” says Suzanne Schmitt, vice president for family engagement at Fidelity Investments. That typically means sitting tight with your current investments and refraining from investing any lump-sum insurance or pension payout. “Don’t make any irrevocable decisions with lump-sum proceeds until you have had the time to fully review your finances and develop a thoughtful financial plan,” she adds.
When thinking about where to allocate the money from an insurance policy, there are a few options, including modest interest-paying certificates of deposit, money market accounts, or Treasury bills— though for the longer term, these kinds of investments may be too conservative. Check out Bankrate.com for a list of institutions with top-yielding CDs and money market accounts.
One slip-up Ginny McKinney acknowledges was putting all the insurance proceeds into an easy-to-access savings account. “If I had it to do over again, I would not have immediately taken Dan’s life insurance in one lump sum and put it in a liquid savings account,” she says. “I would have told my financial planner that I wanted a certain amount from that lump sum each month. Instead I put it in an account and I had easy access to it. It slipped through my fingers quickly.”
It’s not that it was a huge amount of money, McKinney admits. “It wasn’t like I was going to be set for life. There was debt that needed to be paid off, but I wish I had been more practical about how I received that.”
4. Don’t give in to pressure from others
Widows must be wary of being taken advantage of by people who may or may not have their best interests in mind. Even well-meaning relatives may offer advice that works for them, but which may be all wrong for you. “Luckily, I didn't have a whole bunch of money, so it wasn’t like people were coming out of the woodwork to get something,” says McKinney.
Other widows spend on gifts to adult children, relatives, or charities. In many ways, that largesse helps to heal the pain of loss by giving to someone else. For now, though, maintaining control of your cash is prudent, at least until you know how much you will need to support your solo lifestyle. “For widows, there’s almost always a loss of income, and they find themselves living on less,” says Cindy Hounsell, the founder and president of WISER. Women also generally live longer than men, so it’s even more crucial that they plan their finances prudently.
McKinney did apply the brakes when it came to selling the couple’s home. She waited a year before selling it for $260,000. “I realized, without Dan, the house just wasn’t for me. I didn’t love it.”
5. Assemble your team of experts
The first step McKinney made after her husband’s funeral was to connect with a financial advisor, who specialized in working with women. A friend referred her to this advisor, who made it clear from the start that McKinney needed to make her own financial decisions. “Over time, she has taught me to be a good steward of my money,” McKinney says. “And no question is too dumb to ask her.”
Talking about investing and finances can be daunting. Circle yourself with experts you can trust, and with whom you feel comfortable asking basic questions without being self-conscious about your lack of knowledge.
Ask yourself who has helped you and your partner deal with your money matters in the past.
- Do you have a financial advisor or planner, an accountant, and an attorney?
- Is there a personal banker or a trust officer who handles your accounts?
- Is there a trusted family member or friend who can offer guidance or connect you with professionals they currently consult?
- What about an insurance agent?
Ideally, you should have a team of trusted advisors in place for any eventuality, Schmitt says. If you don’t have ones you can rely on, start by asking friends, as McKinney did, for recommendations.
6. Get objective investment advice
When you’re ready to take action with your investments, probably in about 12 months, set up an appointment with a financial advisor to help you develop a short- and a long-term investment plan. You might interview a few to find one you trust.
“Talk to an advisor and get a feel for what you can expect from him or her, and vice versa,” Schmitt advises. “That’s really important. A widow needs to explain what she is concerned about and what keeps her up at night. That will start to lay a firm foundation with that advisor. Then, based on current circumstances and understanding about how comfortable she is with risk, the advisor can start to talk about how to step into a plan and an investment strategy that makes sense for her.”
Sometimes, people think that the value of financial advice is simply reflected in investment performance, but that is just one component of the financial planning process. There are many other aspects that can affect your bottom line and personal well-being.
Professional advice has the potential to help you navigate complex savings, tax, insurance, retirement income, and estate planning issues. At the same time, an advisor can act as a coach, to help you avoid any tempting offers that become costly mistakes.
7. Learn the basics of investing
“I was scared to death,” McKinney says. “There was such a learning curve. I didn't even know what an IRA was when I inherited Dan’s.”
The range of investment choices can be overwhelming: zero-coupon bonds to government bonds to junk bonds to green bonds; thousands of mutual funds and exchange-traded funds (ETFs) that invest in everything from real estate to foreign currencies; and, of course, a plethora of companies that sell shares of their stock on the public exchanges.
Take a breath. Most of McKinney’s education has come from her financial planner’s steady hand-holding. “At our meetings, we sit over coffee and I ask all these different questions. She helped me see my financial picture and realize how much control I have over where I put things, instead of just letting someone else take over.”
Explore the resources your employer provides. Most employers (through 401(k) providers) will offer services to help people become more financially literate.
- Tip: Get started learning about fundamental investing strategies, along with a wide variety of financial topics, at Fidelity Viewpoints® and the Fidelity Learning Center.
8. Start a family conversation
Within the first year, a widow “should sit down with her family and team of trusted advisors, and let those people in her life who she loves know about the others who are going to help her family pick up the pieces, if something happens to her,” Schmitt says.
Review your important documents: a will, a living will, separate durable powers of attorney for health care and financial decision-making, deeds, insurance policies, investment accounts, bank accounts, income statements, retirement accounts, all outstanding loan documents, and current bills.
Update your will and your trust, or create them if you don’t already have them. Consider who has your power of attorney to make investment and other financial decisions for you if you’re incapacitated. “Somebody who is going to be a health care proxy needs to be a person who is relatively close to you emotionally and physically, says Schmitt. “That person is going to have to understand what is important to you.”
For a power of attorney, ask yourself if there is one of your children who is more financially inclined, or a loved one who can step into that role if necessary, she advises. “This should be someone you feel comfortable talking about your money with.”
You might also consider setting up a “virtual safety net,” recommends Schmitt. One layer of protection to consider is to save digital backups of electronically scanned essential documents such as bank and investment account statements, birth certificates, insurance policies, passwords, tax records, and wills.
EverSafe, an online account monitoring service, sends suspicious-activity alerts, including warnings for unusual withdrawals, missing deposits, odd charges, changes in spending patterns, and much more.
You might pick 3 or 4 people to get alerts. “With both of these services, the people who are allowed access to the financial documents can be friends, a family lawyer, or biological family members. If privacy is a stumbling block, the service can be set up in a way where you don't have to reveal amounts you hold in accounts. Monthly fees range from $7.49 for up to 5 financial accounts to $22.99 for unlimited accounts and monthly credit reports. (Fidelity customers receive a discount.)
“It has taken me a while, but I recently started the family conversation about what will happen when I die or become ill,” says McKinney. “After losing Dan so abruptly, I should have put that straight to the front burner, but I didn’t. I couldn't think about it. This summer, I met with my two daughters, ages 27 and 43, and started the process of naming my power of attorney and health care proxy. I told them where I stored my important papers and gave them the contact information for my financial planner, my accountant, and my lawyer, as well as a few important friends.”
The biggest reward for taking control of her finances: “I’ve slowly learned to trust my judgment and I never shy away from discussions of finance and money anymore.”