The death of a spouse or partner can cause drastic changes in retirement plans, according to a report recently published by the Society of Actuaries (SOA). Roles in handling finances may also change, and lifestyle needs (housing, companionship and care) will also be altered, according to the report.
In an interview, Cindy Levering, a member of the SOA’s Committee on Post-Retirement Needs and Risks, discussed this risk and the ways to manage it.
According to the report, many financial vehicles are available and can be used in combination. These include: life insurance, survivor income in Social Security, traditional pension plans and annuities, long-term care insurance, and savings and investments
According to the report, wills and estate planning are important tools to provide for a surviving spouse or partner. And it’s important to be sure to keep beneficiary designations up-to-date.
In addition, the report notes that adult family members and friends may step in to help with adjusting to the new circumstances, making changes, managing finances, assessing choices or providing care.
The report also recommends planning wisely for Social Security survivor benefits. “Married couples may want to choose their Social Security retirement dates carefully to increase potential survivor benefits,” the report states. “Many options exist, but one option is that the lower earner applies for benefits as early as age 62 and the higher earner waits until age 70. The best approach varies by situation.”
Where one spouse or partner managed the finances and the other has limited capability, buying an annuity for the limited-capability spouse or partner is a way to protect the person from needing to manage the funds, according to the report. “However, trade-offs are involved, and retaining some assets to pay for emergencies is important as well,” the report states.