During the course of his 30 years of financial advisement, Tom Waring, president of Waring Financial Group in Hamburg has seen a disturbing pattern develop.

“It’s uncomfortable for couples to discuss what may happen if one of them suffered from a long-term disability or sudden death, so they don’t do it,” he explained. “And I’ve seen many widows come to our offices in very difficult financial positions because of it.”

Recently, Waring and some of his widowed clients have decided to create a group that would help educate women’s groups and couples about how to financially prepare for these unpleasant eventualities. Although Waring and several of his widowed clients have been meeting for almost three years, working through these issues and informally educating others they met under similar circumstances, the group has decided to become more structured and intentional about reaching as many women as possible with this information in 2010.

Waring developed the idea of starting a group in 2007. During a six-month period of that year, three ladies who suddenly lost husbands under the age of 55 all came to his offices for financial advice. But the similarities between them ended there.

“Some of the spouses had been better advocates for themselves before the men died,” Waring explained. “All three had the same experiences with losing husbands, but they had different recovery experiences.”

According to Waring, one of the women was able to resign from the part-time job she held and grieve without needing to worry about her finances. And while Waring made a point not to minimize the severity of her loss, he did cite that the widow shared how her ability to financially maintain the other areas of her lifestyle increased her ability to cope with the loss.

The other two widows were concerned about their financial futures.

What was the difference between the first widow and the other two? The first had frequent conversations with her spouse about how the household would financially continue if one of them died prematurely, and configured their assets and insurance policies to prepare for that possibility.

“Money doesn’t replace a spouse, but it will buy you options,” Waring continued. “The last thing a person needs after losing a husband is having the added pressures of meeting unexpected financial obligations. Financial freedom buys time to recover.”

Waring reviewed common misconceptions people have about what their income would be if widowed, and described potentially costly mistakes people often make regarding their financial futures in the event of one spouse suffering a premature death or long-term disability.

Among them were:

Not talking about it.

These topics aren’t fun to talk about, so people avoid it. Waring recommends having these conversations every six months or every year. They don’t have to be long discussions; a couple devoting an hour each year to the topic probably has their concerns covered.

Not distinguishing between retiring on income and retiring on assets.

All widowed income is not created equal. Someone retiring with a pension of $1,000 per month and another retiring with enough assets to withdraw $1,000 per month are in very different financial places.

The person with the pension may not always be able to count on that pension, especially if the state agencies or private companies funding them suffer financial hardship. Sometimes, it is not even possible for a widow to collect a spouse’s pension, and widows operating under that assumption can be in very dangerous financial territory.

The same risks apply to other post-retirement income sources, like Social Security.

Not knowing about the Social Security “Blackout Period.”

While the Social Security program does many wonderful things, it is important for couples to know what it will and won’t do, Waring cautioned.
One example is what financial planners call the “Blackout Period” between the death of a spouse and the survivor’s ability to collect.

“Generally, If your youngest child is over 18 when premature death occurs, you can’t collect your spouse’s - or your own - Social Security survival benefits until you turn 60,” Waring explained. “This poses a real problem for a 52-year-old widow with enough assets to cover expenses until age 55.”

The potential for “living too long.”
As human life expectancies increase, many people are faced with the possibility of living longer than their retirement assets can support them. The insurance industry not-so-delicately calls this condition “living too long,” as the retiree’s financial resources die before the retiree does.

Waring explained that an appropriate ration between savings and life insurance can usually prevent this from happening.

Spending their post college “pay raise.”
Waring mentioned that many married couples have similar life patterns, and that there often comes a moment - usually after a couple makes their last college tuition payment for their youngest child - when their finances are finally fully theirs for the first time in decades.

In a sense, the couple just received a raise in pay, since their financial obligations to their children have been greatly reduced or have disappeared altogether.

A frequent reaction to that realization is to spend money on those things the couple has deprived themselves of: travel, sports cars, expensive hobbies and so forth. Waring sees it as a period when a couple can ramp up their retirement savings - which have probably been neglected for quite some time - positioning the couple to retire with a greater percentage of assets instead of income.

Not knowing the width of the gap between a couple’s current lifestyle and the point at which government help becomes available.

The income threshold at which public assistance becomes available is painfully low in comparison to the lifestyle many married couples share. Couples who don’t know how much they’d need to lose in order to qualify for government help may be in for very unpleasant surprises.

Typically, most widows in this situation turn to their children for economic support out of desperation, which wouldn’t be how most people would want to spend their twilight years.
For widows who have just lost husbands, Waring offers the following advice:

“Go with your gut if you haven’t done any planning,” he said. “Don’t make long-term commitments to anything, and surround yourself with people who love you. Be extremely cautious of new “friends” and advisors, who present themselves to you. Take the time to interview potential advisors, and get references from them. If you can’t make ends meet, turn over every stone in search of benefits your or your late husbands employer may offer a benefit you could claim, and the military may offer something if your spouse was a veteran.”

Another issue that sometimes arises involves husbands who aren’t interested in planning. In such cases, Waring suggests - particularly if children are involved - that wives figure out what minimum income they would want to have in the event of their husbands’ deaths, and do whatever is needed to obtain the necessary capital to ensure that the kids can be provided for. He recommends seeking counsel from lawyers, accountants and financial advisors to create a plan. If wives in this situation don’t do that, the children pay the price.

“Even if you have to have the conversation alone with the advisors, go” Waring concluded. “The kids can’t do it on their own.”

During the first quarter of 2010, Waring and his group plan to bring these and other retirement issues to the fore during workshops called “Pearls of Wisdom,” assembled by Mass Mutual Financial Group, to area churches and women’s groups.

For more information about the widows’ financial group, call 648-2412 or Email twaring@finsvcs.com.

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