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Financial guidance for new widows: Caution
One-third of women who become widows are under 65
Financial guidance for widows
Ginny McKinney was 59 when her husband, Dan, died unexpectedly at 62.
Posted: Monday, April 4, 2016, 12:00 am
By Kerry Hannon New York Times
My husband and I had decided life was too short,” recalled Ginny McKinney, “so we went shopping to buy a travel trailer to take us into an early retirement.” That was three years ago.
“While standing in the fourth trailer that we were considering, he had a heart attack and died,” she said. Dan McKinney was 62.
Ginny McKinney was 59 and retired from her work as a medical assistant, although she was taking on sporadic work to make a little extra money. Her husband was getting ready to retire from his post as a restaurant manager at the Ritz-Carlton Club at the Aspen Highlands Ski Resort in Colorado.
Like McKinney, one-third of the women who become widows are under age 65, according to data from the Women’s Institute for a Secure Retirement, known as Wiser, a nonprofit organization dedicated to women’s financial education and advocacy. The Census Bureau reported in 2011 that the median age of widowhood was 59.4 for a first marriage and 60.3 for a second marriage.
No one is ever prepared for such an event. But for many women, the road to financial hardship begins after their husbands die. Nearly a third of single women older than 75 are living in poverty, according to Wiser’s research.
McKinney is not one of them. The couple had some savings, and she was the recipient of his $150,000 life insurance policy. Nonetheless, the sudden loss turned her world upside down. “He carried my heart on a velvet pillow, and I was crushed,” she said.
One of her first moves after the funeral was to connect with a certified financial planner, Danielle Howard of Wealth by Design in Basalt, Colorado, who made it clear from the start that McKinney needed to share responsibility for her finances and not leave everything to her adviser.
“Some women are heads of households and managing it all,” Howard said, “but probably 75 percent of women I’ve worked with just go, ‘I am not good at math.’ It is not a matter of being good with math; I tell them. You can use a calculator. You just need to be comfortable talking about it.”
Howard urged her client to increase her financial literacy. “That education is vital to getting your feet back on the ground,” she said.
Like most widows, McKinney is living on a lot less than before her spouse died. “The big-picture look at widows is that there’s almost always a loss of income,” said Cindy Hounsell, founder, and president of Wiser. Women also generally live longer than men, making it even more important that they plan their finances carefully.
Two weeks after her husband’s death, McKinney went back to the travel trailer dealership and bought a 15-foot Sportsmen Classic.
“I took off for three months, driving a circle around Colorado,” she said. “I went to places in the wilderness and on the top of mountains, where I could stand outside and scream at the sky, and scream at God for taking my man. And scream at him for leaving me.”
Since her husband’s death, McKinney has put tens of thousands of miles on her truck and trailer. “I’ve done a lot of driving, but I haven’t done anything exorbitant,” she said. “I didn’t go around the world.”
Indeed, widows need to make their initial financial moves cautiously. “There’s a sense of urgency to do something right after you lose a spouse, but I caution widows to recognize the psychological trauma and don’t do anything hastily,” said Eleanor Blayney, author of “Women’s Worth: Finding Your Financial Confidence” and consumer advocate of the Certified Financial Planner Board of Standards.
“Widows, in particular, have to be very careful about being taken advantage of by people who may or may not have their best interests at heart.”
One stumbling block for many widows is knowing where the money is. That often requires some sleuthing to locate savings accounts, brokerage accounts, and retirement plans – and identifying the proper online passwords. “The first step to piecing things together,” Blayney said, “is digging out your joint tax returns for the past five years.”
“An ounce of prevention is everything,” Blayney added. “Anticipating widowhood is tough, but the more financial information a woman can gather in advance of the loss of a spouse, the smoother it will be.”
Most financial planners suggest that widows refrain from investing or spending any lump sum insurance or pension payout for at least six months and ideally a year.
An even more important decision is where to live. “That’s an emotional one because the family home is often the locus of the marriage,” Blayney said. “It’s not just a financial decision; it is a very emotional decision.”
McKinney waited a year to sell the couple’s home in New Castle, Colorado. “After I came back from my trip, I never moved back in,” she said. “I realized I was living in my camper on the front curb and using my house as a really expensive laundromat. I didn’t love the house anymore.”
After paying off the mortgage and upgrading to a 250-square-foot travel trailer, she had $63,000 left. “For now, I draw from that for living expenses,” she said, “so I don’t touch my retirement savings.”
McKinney also found new life through sharing with others, writing a blog on Facebook for widows and forming fresh bonds with the women she met through Sisters on the Fly, a women’s empowerment adventure group.
“They’re a hoot,” she said. “I needed to have something joyful to look forward to, and there they were.”
One of the reasons I give clients an updated balance sheet is to help an uninvolved spouse understand what the assets are and what they are worth. My analysis of what those funds can produce is also meant to help. Understanding these things takes away some of the fear that comes from the unknown.