Women and Money Don't Have to be Like Oil and Water

Guest blog by Mary McGrath

He always took care of her.

Judy never worried about money, investments or taxes. But now she finds herself alone -- a widow scared out of her mind.

Things are changing. She's only going to receive one Social Security check, and her husband's pension was cut in half upon his death. Plus, he never mentioned unpaid credit cards. She thought the cards were paid monthly.

How will Judy ever manage?!?

You may not think this could ever be you, but think again. The average age of a widow in the U.S. is 55. Eighty-five of every 100 American women will be on their own financially at some point in their lives. And only 47 percent of women participate in pensions. 

It's time to get educated. This doesn't mean you need to get a degree in finance or even start reading the Wall Street Journal. But it does mean you need to know where you stand financially and what will happen if your husband predeceases you. Only YOU are responsible for your financial well being. 

Start out by being actively involved in any decision your husband makes that will affect your financial security if he dies.

Find out where your income comes from. If you're in the retirement stage, it's probably a combination of Social Security, pension income and investment income. The next question is to know what happens to this money when your husband dies. 

If the pension is from your husband's employment it could possibly change at his death, depending on an election made at retirement. Most pensions have what is called a survivor option. This is the percentage of the original pension that continues after the death of the retiree. You should know if his pension will continue unchanged (100 percent survivor option), stop all together (no survivor option) or something in between.

Did you know that his Social Security check will stop at his death? But you, as the survivor, will receive the higher of his Social Security or yours.

In other words, if he is receiving $2,000 per month and you get $1,000, on his death you will lose his benefit, but your total will increase to $2,000 per month. That's still $1,000 per month less than you received as a couple.

And what about investment income? Based on what you are taking from your investments, how long is it projected to last? Women live, on average, seven years longer than men. If your husband is five years older than you, the investments need to last at least 12 years longer after his death. Find out how this is calculated and make sure there will be enough left for you.

What if your husband plans to put your assets in a trust? How much control will you have over the trust? Can you access both income and principal or only income?

Next, look at your expenses. If you find trouble ahead after reviewing the income side, try cutting expenses. Don't take that big trip, drive your cars longer and don't overindulge the grandkids. It's easier to trim expenses now than to wait until the money's not there.

It's true that some expenses will be cut when there's only one of you -- but not many. Get an idea of how much your expenses will fall if your husband were to die before you.

All of this is not an overwhelming task. It's time to be in touch with your finances. A little work today can save years of agony later.

The lion's share of all women will be solely responsible for managing their finances at some point in their lives. Be sure you're one of the ready ones.