5 Ways to Protect a Surviving Spouse in Retirement

Couples need to be financially prepared for widowhood.


Retirement planning for a married couple is more complex because it’s not all about you. Spouses have a moral obligation to consider the financial impact of their planning decisions on their married partner. Here are five ways you can protect a surviving spouse in retirement.

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Plan for widowhood. Sometimes married couples forget that a premature death of one spouse can radically affect a retirement income stream. The impact is particularly acute if the couple depends heavily on a pension or annuity with poor or non-existent survivor benefits. In the case when both spouses are receiving Social Security retirement benefits, the death of one spouse will cause a loss of total benefits. To prepare for this, a contingency plan should be in place for the surviving spouse. This can be in the form of life insurance to replace income or a reasonable lifestyle downsizing plan to reduce expenses.

Maximize the Social Security spousal benefit. A spouse who is at least 60 years old is entitled to a survivor’s benefit based on the Social Security record of a deceased spouse. The survivor’s benefit can be as much as 100 percent of the benefit received by the deceased spouse. If the surviving spouse claims the benefit before reaching full retirement age, the benefit will be decreased by up to 28.5 percent. The size of the survivor’s benefit is dependent on the size of the deceased spouse’s benefit. This increases the importance of good decision making by each spouse as to when his or her Social Security retirement benefits should be claimed.

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Preserve liquidity in your estate. Death is often accompanied by large unexpected expenses. These can include medical bills and other lingering debts, funeral expenses, probate costs, taxes, and the financial cost of making distributions to heirs. Access to ready cash to meet these obligations is a must. Tragically, some surviving spouses are forced to liquidate hard assets to quickly raise this cash. Don’t let that happen. Plan ahead and, through insurance or otherwise, be sure that there is enough liquidity in your estate to take this burden off of your spouse.

Protect assets from creditors. A car accident, failed business, or unhappy client can lead to lawsuits and large personal judgments. If you are facing present or future obligations to creditors like these, you should minimize the potential impact on your spouse. One simple technique to protect assets is to title them properly. Many states recognize a special form of marital property ownership called “tenancy by the entirety”. This form of ownership makes it difficult for a creditor of one spouse to collect a judgment from jointly owned property. Ask your lawyer to advise you about using this strategy in your retirement planning.

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Plan for long-term care. A sure way to deplete a retirement portfolio is to support a spouse needing long-term care. Medicaid can help but usually only after most of the marital property has been used to pay for care. Of course you don’t want to leave your spouse in this position. Plan ahead by purchasing long-term care insurance or setting aside enough funds to cover a long-term care event.

Good retirement planning means looking at the big picture. Make sure that your spouse is prominently positioned in that picture.

Mark Patterson is an engineer, patent attorney, baby boomer, and author of The Failsafe Retirement System. He blogs on matters of personal finance and retirement planning at Tough Money Love and Go To Retirement.