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Loss of Spouse Risk1

The loss of a spouse is a major personal loss, but without planning can also result in a decline in economic security.

For example, suppose someone was beginning to receive a pension at age 65.  To increase monthly benefits, they chose the Single Life option, which ceased upon their death, cutting their spouse's income drastically as they no longer had any pension income and Social Security benefits were reduced as well.

Surveys from the Society of Actuaries continually find that people generally do not comprehend the financial magnitude of the loss of a spouse.  Such a loss always means a reduction in Social Security benefits as the smaller benefit that is being paid ceases at the death of the first spouse or, in the case of  someone that receives a non-covered pension, the Social Security benefit is reduced based on this pension.  Often times the surviving spouse may not have the knowledge, ability or interest in managing finances, and women from the baby boom generation could be widows for as long as 15 to 20 years.  This makes them particularly vulnerable as statistics show that 15% of elderly widows are in poverty compared to only 4% of couples who are in poverty.

1 Retirement Risk Solutions, David Littell, The American College of Financial Services, 2017.

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