Losing a spouse is an extremely stressful life event, and that stress can be compounded by the many financial questions you might face. How you'll support yourself, what benefits you can claim and whether you should adjust your investment strategies are just some of the choices you might need to make.
Making major financial decisions while also dealing with grief can be overwhelming. Here are some tips that can help you better navigate this difficult journey.
Prioritize the Most Pressing Financial Issues
Since the period immediately following a spouse's death might be the most stressful, avoid hastily making major financial decisions during this time. Instead, focus on what can't wait, such as managing cash flow and making sure you're able to pay your bills, including any end-of-life or funeral costs. If your spouse had a will or trust, you'll need to obtain a copy and identify the executor or trustee and beneficiaries. You'll also want to obtain several original, certified copies of the death certificate in order to process claims, update accounts and settle your spouse's affairs.
Determine Your Benefits
Typically, funeral homes will notify the Social Security Administration when someone dies, and you should confirm that it's been reported. If both you and your late spouse collected Social Security benefits, you'll only be eligible for one Social Security payment--whichever one was higher--following your spouse's death. You might also be eligible for a small one-time death benefit payment.
Surviving spouses don't have to wait until retirement age to receive survivor benefits. Eligibility for Social Security survivor benefits generally starts at age 60, and you could receive them earlier if you have a disability or are caring for a child of the deceased. However, retirement and survivor benefit amounts increase depending on the age at which you apply, so you'll want to evaluate how to best maximize your benefit amount.
In addition to Social Security, be sure to review what, if any, other death benefits you might be entitled to. This could include benefits associated with life insurance policies, annuities, stock options or pensions. You could also be eligible for death benefits if your spouse served in the military or worked for the federal government. You might want to discuss the various payout options available with an investment professional before making a decision. For employer-sponsored life insurance policies, contact the human resources department of your late spouse's employer for help.
Take Stock of Your Investments
Once you've had time to address immediate concerns, review your spouse's investment and retirement accounts. Notify your financial institution and provide the necessary documentation of your spouse's death. For joint accounts or accounts where you're the beneficiary, you'll need to provide a death certificate.
Talk with a tax or investment professional about the choices available to you, such as whether you can keep your spouse's retirement accounts as inherited accounts, transfer them into an inherited individual retirement arrangement (IRA) in your name, or roll them over into your own IRA. The financial and tax considerations can be complex, and what you do will impact how the account is treated, particularly with regard to required minimum distributions (RMDs).
Also think about whether to adjust the asset allocation in your accounts. Maybe your spouse favored a particular investment strategy. However, you might have a different risk tolerance level or decide that strategy isn't the right fit for you now. You might also decide to direct some of the money from death-related benefits to new investments. As with any investment decision, it's important to do your own research and be sure you understand a product's benefits and risks before committing your funds. Try not to let emotions that can cloud financial judgement influence your decision.
Revise Your Legal Documents
After losing a spouse, it's important to review your will, as well as your beneficiary designations for retirement and investment accounts. These documents might now need updating to reflect your changed circumstances and ensure that your assets will be distributed according to your wishes in the future.
Beware of Fraud
Unfortunately, financial fraud often follows the death of a spouse, and scammers often target older individuals and those who are emotionally or financially vulnerable. Be aware of common tactics that scammers use, and look out for red flags like high-pressure sales pitches or promises of risk-free returns. If you worry that you're being targeted or have a question or concern about your brokerage account or an investment recommendation, contact FINRA's Securities Helpline for Seniors toll-free at 844-57-HELPS (844-574-3577). You can also file a complaint about a brokerage firm or financial professional or submit a regulatory tip about possible fraudulent, illegal or unethical activity to FINRA.
Consult a Professional
Qualified investment professionals can help you manage your finances as you adjust to life without your late spouse. Use FINRA's free BrokerCheck tool to research the background and experience of individuals or firms you're considering working with.
For additional information, read the Consumer Financial Protection Bureau's guide, Taking Control of Your Finances: Help for Surviving Spouses.
