Planning for the Surviving Spouse

It’s unfortunate, but reality that if you’re married you likely won’t pass away at the same time. Not everything ends up like if you’ve seen the movie “The Notebook” and how that couple ends up passing away pretty much within a few minutes of each other of broken hearts. And so that doesn’t seem to happen always in the real world. So you need to make a plan for whomever may be the first to pass away and protect that surviving spouse. So let’s start with Social Security. When do you take it? Again, we might lean towards delaying the higher earner’s benefits just in the case of the surviving spouse because again if you look at Social Security, how to maximize those benefits for a surviving spouse is then if one spouse passes away, again, you can draw the larger of the two benefits. If you visit https://url.us.m.mimecastprotect.com/s/4tZzCNkK69To9B64i7UXFyajcA?domain=cen-wealth.com midway down on the homepage we have a 16 page guide, free download all about Social Security. So in an example let’s say one spouse is receiving $3K worth of benefits, retirement benefits. Another is receiving $2K. So you have a total of $5K. But if one spouse passes away, you simply keep the higher of the two. So you would then receive only $3K in that basic example, But outside of Social Security, what about a Pension? Again, we continue to see Pensions going by the wayside for the most part. Fewer people have Pensions. If you do have a Pension, are there survivorship benefits? If you pass away, you know, does the surviving spouse receive 50%? Or maybe it’s two-thirds or maybe even 100% of your Pension benefits. But it also might work in the other direction where if you’re the owner of that Pension and your spouse were to pass away and maybe you had survivorship benefits, sometimes your Pension will actually increase in that scenario. What about an annuity? Some people go through the insurance companies set up some type of annuity that either has a single lifetime income or maybe it’s a joint lifetime income. So this is an important decision if you’re setting up that type of an account that is geared towards paying lifetime benefits. And you need to elect some of those benefits at the beginning whether you’re going to draw it based on a single lifetime or a joint lifetime. So consider those, you know what income you may lose. Are you still working? And what about those lost wages? What impact is that going to have on a surviving spouse? So that’s where life insurance may come into play. It might be very vital during your working years and especially if you have young children at home wanting to have some type of life insurance in place. Normally term insurance is your lowest cost for the higher death benefit. And then as time moves along, you may look at whole life or universal types of policies that might have some cash values associated with them. What are your expenses going to look like? That’s a tough one to know. I mean there’s going to be certain parts of your budget that may increase if one spouse say, primarily handles some of the home maintenance and now all of a sudden you’re going to have to hire out some of that type of work. Or what about if there’s child care assistance needed? Again, those can be very expensive nowadays. On the other hand, you might look at it and expenses could decrease a bit. Now that there’s only one of you in the couple, maybe you’re not going to be traveling as much as you did before. Maybe you’re not dining out as much. So those could change. One area especially to be cautious of are taxes. So if you look at the tax brackets, you effectively go and cut them in a half for the most part when it goes from a married couple down to a single individual. And so we don’t have enough time to dive into all of those details, but maybe having some after-tax funds in your savings and maybe different types of brokerage accounts after- tax money you could draw from or Roth money that would be tax-free could be very helpful. Lastly, estate planning. Again, you want to get all of your ducks in a row for that. So over the nearly 19 years here at Centennial Wealth Advisory we’ve planned, assisted many clients in a surviving spouse situation. And it’s never one that is fun to deal with on the back end. But I will say, when you’ve done the appropriate planning leading up to that, it makes that transition that much easier just having that confidence knowing that okay, my income and expenses are going to be taken care of. I have the assets to help support that. So if you have questions, don’t feel that you have the best plan in place for your surviving spouse, give us a call here. We’d love to help you plan to retire well.