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Surviving a Loss
By Karen Hube, March & April 2005
A new widow finds her income reduced by more than a third. Can she still pay the bills?
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Before her husband died last month, Mary Yaeger, 70, of St. Paul,
Minnesota, never worried about the couple's finances. Andrew,
72 when he passed away, had paid the bills, managed their nest
egg, and handled all other financial matters. Now Mary wishes she
had paid more attention. As if grieving for her spouse
weren't enough, she is also faced with the daunting task of
taking over the couple's finances. And she is deeply
concerned about her future security. Her fears are not unfounded:
according to the Women's Institute for a Secure Retirement,
more than a third of single women over the age of 75 live in
poverty.
The Plan
Mary's first inclination is to grieve first and deal with
unpleasant financial matters later. As hard as it may be right
now, though, it's critical that Mary not put this off even
one more day. "Mary must take steps immediately to preserve
her monthly flow of income," says Mark Kaizerman, a
financial planner in Natick, Massachusetts. Otherwise, she could
suddenly find herself with no money to pay the bills.
Mary has one thing going for her: she won't have to endure
probate, the often lengthy and expensive process by which a court
oversees the distribution of assets in an estate. Mary was listed
as a joint owner or beneficiary of all the couple's assets,
so she should be able to take care of everything without going
through the courts.
Mary's first task is to figure out how much money she has
coming in. She knows that most of the couple's income came
from Social Security and Andrew's pension from his lifelong
job at a major electronics company. Because Mary is 70, she will
qualify for full Social Security survivor benefits. To get them,
she must contact the Social Security Administration
(800-772-1213). As a widow, she'll be able to collect
two-thirds of what the couple was receiving from Social Security
before Andrew's death. Next, Mary must contact Andrew's
former employer to request that his pension be paid to her.
Again, her benefits will be reduced—she'll qualify for
just 50 percent of Andrew's monthly pension, the standard
amount paid to surviving spouses.
The Next Step
Mary should inventory all of the couple's assets, from IRAs
to certificates of deposit. Then, she should request a rollover
of any IRA or 401(k) assets into an IRA in her name only. She
should also take Andrew's name off any other property, to
avoid confusion down the line. To retitle her home, she should
contact the county; for their car, the department of motor
vehicles.
As for debt, Mary will get a good idea of her situation as
monthly bills flow in. But she could get a snapshot by reviewing
a copy of her credit report. Thanks to a new law being rolled out
through September 1, 2005, she can get a free copy online at
www.annualcreditreport.com
or by calling 877-322-8228.
Once she has a good handle on her assets and liabilities, Mary
can set a monthly budget. With her reduced income, she'll
need to be extremely careful about what she spends. She might
also consider hiring a fee-only financial planner to make sure
all the pieces of her financial picture make sense.
"Let's face it," says Karen Kabarec, a financial
planner in Palatine, Illinois, "finances are hard enough to
manage even in the best of times."
Karen Hube has written for Money magazine and The
Wall Street Journal.
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