Losing a partner is an overwhelming and life-changing experience. Apart from intense sadness and a deep sense of loss, the surviving partner often suffers profound financial impacts. The surviving partner therefore has to cope with other losses that ripple out from the pain of the death itself, termed as secondary losses. Many people find themselves financially vulnerable after the loss of their partner. A few of the financial difficulties that one might face include the following.
Loss of income
If the deceased spouse was the family’s breadwinner or a significant earner, their death could substantially reduce monthly income, impacting the ability to take care of the regular expenses. The surviving spouse might face various financial challenges such as paying for utilities, groceries, housing, childcare or other daily expenses.
Sudden financial strain
The final arrangements such as funerals or burial can strain the surviving spouse’s finances. In many cases, the deceased required extensive medical treatments before their death, leading to significant financial pressure on the surviving partner. Without enough savings and coverage by insurance, the experience can be devastating not only emotionally, but also financially.
Loss of several benefits
If the deceased partner’s company provides several benefits such as health insurance, dental and vision benefits, then the surviving partner might lose the coverage or benefits. Housing allowance could also be discontinued if the deceased was a government employee. If the deceased’s company offered educational benefits, then these benefits might no longer be granted to the surviving partner or family.
Debt obligations
Debt obligations can bring in more financial challenges during an already difficult time. If the debt was in the name of the couple, then the surviving partner may be held responsible to pay.
Compromising on the standard of living
The surviving partner may find it difficult to afford the current housing without the deceased spouse’s income, necessitating a move to an affordable location. The surviving partner might also need to cut back on miscellaneous expenses such as vacations, entertainment or dining out.
Coping with increased household expenses
Certain expenses are bound to increase, such as the need for additional childcare, transportation costs, home maintenance or other services, which were previously managed by the deceased partner.
Changes in tax status and liabilities
The surviving partner might face several tax implications, affecting filing status, deductions, income and estate taxes. These tax implications could be complex and require the assistance of a professional advisor. Understanding the complexities and proper planning could help minimize the tax burden.
Blow to the retirement savings
A spouse’s death can affect the surviving partner’s immediate financial situation and long-term retirement plans. Reduced pension benefits, losing employer contributions in the employer matching policy, and using up the retirement savings to cover the immediate expenses are some of the financial implications for the surviving partner.
Effective ways to mitigate financial challenges
Careful planning and the utilization of various strategies may help to manage immediate and long-term financial needs.
• It is of utmost importance to have a good overview of the couple’s current financial situation at any time.
• Important documents such as wills, trusts, bank statements, insurance policies and other financial records should be secured carefully.
• Notifying relevant parties about the death immediately is advisable to prevent and mitigate financial troubles.
• Consolidating accounts is a great way to make financial management easier. This does not only include merging back accounts but also rolling over retirement accounts.
• Consulting a financial advisor can help to review and update your financial plan. They can help you manage various aspects such as retirement planning, investment strategies and budgeting.
• Considering re-entering the workforce could aid in supplementing income.
• Invest in skill development through education or training to broaden your avenues and improve your earning potential.
• Consider purchasing long-term care insurance to be secured in case of any unforeseen event.
• Join a support group to connect with others and strengthen your emotional well-being.
• Rely on family and friends for emotional support or practical assistance.
Written by Parul Sachdeva