What’s Your Contingency Plan?

Contemplating the death of a loved one isn’t high on anyone’s list, but avoiding the topic and the accompanying emotions leads many to put off planning for the possibility. Although it may seem morbid, ensuring that your partner is financially secure—no matter what the future holds—is a prudent, thoughtful act of love. And while it may lack romance, the benefits last much longer than a dozen roses.

Women Are Especially Vulnerable to the Financial Repercussions of Widowhood

A recent survey underscores how lack of preparation for the death of a partner can be catastrophic for the surviving spouse. The survey reported that more than half of both widows and widowers admitted that they did not have a plan in place for what would happen if one of them died. But the reality is that widows often find themselves in far more desperate circumstances than their male counterparts. In fact, half of widows reported an income loss of at least 50% after their spouse died. No matter what your circumstances, an income loss of this magnitude would be difficult to overcome.

It’s human nature to think, “That won’t happen to me.” But the statistics are meaningful: on average, women live longer than men and, as a result, they are 3.5 times more likely to become widowed. On top of that, the survey uncovered that only 14% of widows had made financial decisions by themselves while their spouse was living. So in addition to coping with grief, many widows are thrown into the overwhelming tasks of tracking down a lifetime of financial records, making a budget for the first time and learning—the hard way—how to stay afloat financially.

The First Step Is Always the Hardest

Before putting this decision off for another day, analyze your family’s current expenses and estimate how much money would be needed to maintain a comparable standard of living in the event that tragedy strikes. For most households, savings need to be supplemented with life insurance. For those on active duty, Servicemembers’ Group Life Insurance (SGLI) is a great first step, but there are limitations. For more guidance on life insurance options, read A Different Way to Think about Life Insurance. 

Whether you are raising young children or embarking on retirement, it’s critical to talk openly and make decisions together so that both partners have a clear financial picture. This is true when putting together a comprehensive financial plan, researching investment options and choosing insurance policies. But the details are also important: communicate where key documents are being held, what bills are set up for recurring payments, and where passwords for important websites are catalogued. 

Have a Plan in Place Before You Need It

Establishing a trusting relationship with a Financial Advisor and putting together a well-thought-out, proactive plan of action will give you confidence that your family knows who to turn to in the event of an emergency. As John F. Kennedy said in his 1962 State of the Union Address, “The time to repair the roof is when the sun is shining.”