Planning for the inevitable not only creates piece of mind, but also improves financial security. Jim Puplava discussed how to replace lost income when a spouse passes away, how to deal with medical and healthcare decisions, how to avoid elder abuse as well as tax and estate matters in a recent episode of Financial Sense Newshour’s Lifetime Income podcast. While these aren’t warm and fuzzy topics to discuss, they’re vitally important for financial health and security.
See Lone Survivor: What Widows and Widowers Need to Know for podcast audio.
What to Do If You’re the Lone Survivor
Married retirees will likely face a situation where one spouse passes away before the other. Typically, the survivors are women and 85% of Social Security survivors are women.
If you are currently drawing Social Security and your spouse passes away, you will receive survivor benefits only if they exceed your current Social Security payment, Puplava noted.
“If your spouse passes away, and his Social Security benefit was greater than your benefit, you will receive that spouse’s increased benefit from then on. If your benefit is larger, however, you will not see an adjustment,” Puplava explained.
Additionally, if you receive a larger benefit, you will lose your own benefit. Instead of receiving two Social Security checks, your household will now receive one. Where couples run into trouble, Puplava noted, is not adequately planning ahead for this inevitable loss of income.
Puplava’s preferred way to mitigate this risk is to purchase life insurance for a couple, or otherwise set aside assets specifically for this purpose, such as in an IRA that will not be tapped until one spouse passes away.
“We like life insurance because the outcome is guaranteed,” Puplava said. “You may be doing just fine right now with both of you getting Social Security, but you need to think of what happens of one of those Social Security checks goes away, depending on who passes away.”
Long-term Care Costs
Another prominent, but often unplanned for, issue retirees must deal with is addressing long-term care issues, Puplava stated. One of the reasons he prefers life insurance options is that these policies often include a rider that helps mitigate the risk of paying for healthcare.
This is known as a living benefit or a long-term care rider, he added. In the event a retiree needs care, such life insurance policies will allow access to the death benefit while the retiree is still living to help cover the expense of healthcare costs.
Purchasing a life insurance policy thus helps address two major concerns for retirees, and makes a lot of sense as a way to ease the burden of healthcare costs. Additionally, any unused portion of the insurance policy that is not used to pay for care will be awarded to the surviving spouse upon the death of the ailing spouse.
“I like these kinds of policies because they take the guesswork out. You don’t know if you are going to end up incapacitated or need assisted care or a long-term care facility. … And I don't need to tell anybody that has had a spouse, relative or a parent that is in a long-term care facility how expensive they can be.”