Widowhood and poverty shouldn't go hand in hand but they often do
If you’re a financial advisor, take heed. New York Life found that nearly 20 percent of widows who dropped a couple’s financial advisor after their spouse died, did so because they didn’t have a relationship with him or her. The study didn’t say how many women stayed with the financial advisor despite being unhappy with him or her but it’s a good bet that many do because they are too intimidated to go elsewhere. What does that mean if you’re a woman? It definitely means that you should be financially proactive before an event such as widowhood occurs.
Forty percent of widows reported negative lifestyle changes after the loss of a spouse. About 24 percent of widowers reported the same. The effect appears to be greater to the widow than to the widower with two-thirds of widows experiencing a significant financial change as compared to half of widowers. Some of the most financially challenging changes were in the ability to save for retirement or take a vacation. To some extent both sexes experienced challenges in budgeting for one income, cutting discretionary spending and adjusting to a single income.
Although the rate of poverty associated with widowhood has fallen since the 1990s, for women, the road to poverty generally begins with their husband’s death. Half of all women who become widowed do so by age 65, making it a concern not of old age but of being female. Because men continue to be the major breadwinners in most households, widowhood generally means a significant drop in income of between one-third and one-half. Nearly a third of all single women over the age of 75 live in poverty. The older you are at the age of widowhood, the more likely that your financial situation will become precarious even though you potentially have far longer to plan for that eventuality.
Take the result of one survey that looked at widows 70 and under who had become widowed within the past 5 years. Those women:
- Had difficulty filing income taxes (61 percent)
- Lost 50 percent of their income with their husband’s death
- Did not have an emergency fund (roughly a third and surprisingly that number climbed to 45 percent for widows with $50,000 to $99,999 in savings)
- Had trouble determining what Social Security entitlements they were eligible for and then claiming them (37 percent)
- Had trouble locating bank accounts and investments and obtaining access after their husbands died (26 percent)
- Had to move to less expensive housing after their spouse’s death (26 percent)
For women, the likelihood that you will become a widow remains far higher than the likelihood that if you were a man that you will become a widower. However, men should take heed as well because while women continue to suffer a greater burden at the loss of a spouse, men also experience a burden. In addition, men and women can make changes to their financial futures that will prevent either spouse from experiencing a devastating financial impact at the loss of a spouse. After all, if you’re married, one or the other of you will likely leave behind a surviving spouse. Preparing for a future without one spouse should be a planning event for both partners.
A NextAvenue article refers to that planning event as the “Moral Obligation of Husbands.” However, the article doesn’t leave it as something males fail to follow through with. Women too must make an effort to be more involved with financial planning. If only 20 percent of women feel prepared for such an eventuality, then 80 percent are dropping the financial ball. What’s more, they don’t even appear to be making an effort to hold onto it. Women have long carried a math deficit and that carries over to our own financial futures. Despite major strides in women’s ability to create wealth, manage business and own our own share of the business world, we continue to be decades behind the financial eight ball when it comes to understanding finances. Take for instance a survey in which 20 percent of women stated that the financial services industry doesn’t understand them (by the way, an equal number of men say the same). Another found that women were convinced that their gender was a key factor in the disrespect and condescension they encountered with the financial services industry.
Women continue to opt out rather than making the effort to find someone in the financial services industry that does understand them. It isn’t just a man’s moral obligation to make sure his wife is taken care of once he passes, it’s a woman’s obligation to take care of herself. You are after all, the woman your daughter and granddaughter look up to. Do you really want to leave a legacy of financial illiteracy? Or as Kerry Hannon writes “You’re accountable for your own financial future. Take ownership.”