Guide women along the walk through widowhood

Although more than $54 trillion in wealth is expected to transfer to widows by 2048, many women still face financial insecurity after their spouse dies.

A LIMRA report, “A Widow’s Walk to Financial Confidence“,  found older widowed women have a higher-than-average poverty rate, while widows overall report low financial preparedness.

Suzanne Norman, a fellow at the LIMRA Retirement Income Institute, explored the emotional and financial impact of widowhood and provided guidance for women navigating this transition.

The poverty rate among widowed women aged 65 and older is 15.5%, compared with 10.3% for all individuals aged 65 and older, the report said. This strongly correlates with their spouses’ Social Security claiming decisions, which leaves many widows with lower survivor benefits.

When combined with women’s longer lifespans and lifestyle costs that do not reduce significantly after a spouse’s death, it’s easy to see the negative impact of widowhood on women’s financial well-being.

The widowhood journey is impacted by emotional upheaval as well as financial stress, the report found. The loss of a spouse is widely recognized as the most stressful life event a person can experience and sits at the top of The Life Stress Inventory Scale.

Many widows had not been engaged in household finances and investing before their spouse’s death. Norman told InsuranceNewsNet that the research shows more women are engaging in household finances and investing “because they have to, not because they want to.”

She added that widows’ higher poverty rates lead to an interest in guaranteed income, such as annuities.

“Guaranteed income has a huge role in the widow’s journey – whether it’s a pension, Social Security or an annuity,” she said. “Advisors are paying attention to these gaps and having the conversation. Our research shows that almost half of the women we surveyed said they want an annuity.”

Emotions also impact widows

The emotions that stem from widowhood also can have physical implications and can impair a widow’s judgment, the report said. Grief affects cognition, decision-making and emotional stability. During this period, widows may struggle with focus, memory and risk assessment. These are factors that directly influence financial behavior and may amplify existing diminished mental capacity. For this reason, financial decisions made during early grief should be approached with caution and support.

Another risk that older widows face is an increased likelihood of becoming a target of fraud. Monitoring an older widow’s financial behavior is more imperative than ever. Family and friends are often the first line of defense.

Financial professionals are often on the front line of helping widows manage their financial choices. But it is important that, beyond getting advice on what financial products to own, women also receive education and a comprehensive view of their financial lives. A formal financial plan can help women understand their assets (e.g., securities, real estate), liabilities (e.g., healthcare risks, debt) and goals (e.g., lifestyle, legacy).

In addition to giving widows financial advice, professionals must be keenly aware of both the changing financial situation facing widows after a spouse’s death and the extra emotional support a widow will need during a difficult time of transition. Many widows will need support building their financial confidence, as they may now need to learn to make all financial decisions independently.

A checklist for advisors working with widows

Norman created a checklist for advisors who work with widows.

• Learn the three classic stages of widowhood: grief, growth,

grace.

• Activate listening skills, sympathy, empathy and reassurance.
• Identify the widow’s trusted family member or friend and begin to build rapport and trust.

Prioritize four actions

• Secure cash flow: Ensure they have access to funds for daily expenses.
• Update documents: Immediately update beneficiary designations on retirement accounts, insurance policies and wills.
• Retitle accounts: Change joint accounts to individual names.
• Review Social Security and pensions: Identify eligibility for survivor benefits.

Host a rediscovery meeting

• Identify their current communication preferences.
• Plan future re-discovery meetings.
• Determine which, if any, important action items need you to take the lead.

Address long-term strategy shifts (3–6 months)

• Budget adjustment: Help them reevaluate income and expenses, as their budget will likely change.
• Tax planning: Address the shift from joint to single-filer tax status, which can have significant implications.
• Avoid quick decisions: Advise against making major, irreversible financial decisions such as selling a home.
• Explore her new purpose. LIMRA Retirement Income Institute research has shown that purpose is worth up to seven additional years of life expectancy.

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