Why Every Woman Needs To Plan for a ‘Second Retirement’

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Many women plan for retirement with their spouses, but the reality is that they also need to be planning for the phase of their retirement that will start after the death of their spouse, particularly if they are in a heterosexual marriage. Women typically live longer than men, so they need to be prepared for a “second retirement,” a phase of life that often comes with different needs and associated costs.

In this “Financially Savvy Female” column, we’re chatting with Tom West, chartered financial consultant and founder of Lifecare Affordability Plan, which helps families plan and pay for care, about how women can plan ahead for their “second retirement.”

“Of once-married women aged 75 years and older, 58% of women are widows,” he noted. “In 2021, according to data from the US Census Bureau, widows accounted for 30% of all older women. There were more than three times as many widows (9.1 million women) as widowers (2.7 million men). These statistics highlight the importance of women’s financial planning and preparation for the possibility of a ‘solo retirement’ period.”

Are You Retirement Ready?

How does your retirement change financially following the death of a spouse?

Married couples often plan their retirement together and save together, so it’s sometimes difficult to assess how much money is available for a “second retirement” — aka “solo retirement” — without your spouse.

If you and your spouse are already retired, the financial impact of a spouse’s death can be significant. The impact depends on various factors, including the surviving spouse’s age, sources of income and expenses you both had, and your extended network. Becoming a widow in your 60s takes different planning than in your 80s or 90s. If your network of friends and family was through your spouse, this might change upon their death, and you will need to rebuild your own support network.

The two most important questions to ask after the death of a spouse are:

What is the new income amount for the widow?

If your spouse had a pension, annuity or other sources of income that stopped after their death, you might need to adjust your budget accordingly. For example, you cannot claim your deceased spouse’s Social Security benefits in addition to your own retirement benefits. If you qualify for both survivor and retirement benefits, you will receive whichever amount is higher. If your spouse had a pension, you might receive survivor benefits. Some pension plans pay a percentage of the pension to the surviving spouse, or may offer a lump-sum payment, which reduces the income for the surviving spouse.

Are You Retirement Ready?

How will your expenses change as a widow?

Some expenses, such as housing, food, transportation and healthcare, may decrease as you no longer need to provide for your spouse. However, one-time taxes on inherited assets like IRAs, property and vehicles may exist. And other annual expenses may increase, such as home maintenance and long-term care costs.

Overall, the financial impact of a spouse’s death on retirement can be complex and will depend on your specific circumstances. Reviewing your finances carefully and working with a financial planner to develop a new plan that addresses your “solo retirement” goals and accounts for any changes resulting from your spouse’s death is essential.

What extra costs should women be prepared for during this time?

After your spouse dies and you have assessed your new income from all sources, looking at any new expenses is essential. Here are some examples.

If your spouse was responsible for home maintenance and repairs, such as yard work, cleaning, and more significant repairs or renovations, you might need to hire someone to perform these tasks, which now need to be budgeted.

You may need to budget for more extended periods of healthcare costs and long-term care expenses during your retirement. That may include anything from regular check-ups, prescription medications, dentist visits and eye exams to long-term care expenses such as home-care aides, assisted living fees or rehab care in a nursing home.

Are You Retirement Ready?

The death of a spouse may involve various legal and administrative tasks, including estate planning, probate, tax preparation and other expenses related to settling your spouse’s affairs. You will also need an elder law or estate planning attorney to plan for your new need for healthcare proxies, power of attorneys, beneficiaries, and updated wills and trusts.

After the death of your spouse, you may find that your living expenses increase. Downsizing, renting or relocating to a lower-cost area may be viable options to reduce housing costs. You may want to intentionally age in place with home-care aides ($25-$40/hour) or move to assisted living, which can cost between $5,000-$10,000/month.

How can women plan for their ‘solo retirement’ period? How can they ensure they are financially secure during this time?

Working with a financial planner can be an excellent way to develop a plan that accounts for the financial changes after losing a spouse. They can help you achieve your “second retirement” goals.

Here are some steps that women can take to ensure they are financially secure during their “solo retirement”:

  • Review your retirement plan: If you have a retirement plan in place, review it to ensure it considers your current financial situation and goals, which may differ from the plan you had together as a couple. If you don’t have a plan, consider creating one with a financial planner.
  • Reassess your expenses: With a change in circumstances, such as the death of a spouse, your expenses may change. Review your budget to reflect your current situation and adjust as needed.
  • Consider your income sources: Review your sources of income, such as Social Security, pensions, annuities and retirement accounts. Determine if you need to adjust your budget or explore additional sources of income, such as part-time work.
  • Review your insurance coverage: Review your insurance coverage, such as Medicare, Medigap, supplemental insurance and long-term care insurance (LTCI). Determine if your coverage meets your needs and if changes are necessary. Continue to pay your LTCI premiums, if you are an LTCI policyholder.
  • Plan for long-term care: Long-term care can be a significant expense during retirement, and it’s essential to plan for it. Consider your options, such as in-home care, assisted living and nursing home care, and determine how you will pay for it.
  • Stay involved and connected: Maintaining social connections and staying active can help you stay mentally and physically healthy during retirement. Consider joining a community group, volunteering, or pursuing hobbies and interests.
  • Have a backup plan: It’s essential to have a backup plan in case of unexpected events, such as a health crisis, stock market downturn or family crisis. That may include having an emergency fund or exploring insurance options.
Are You Retirement Ready?

Overall, planning for a “solo retirement” period requires careful consideration of your financial situation and potential risks. Working with a financial planner can help you develop a plan that considers these factors and enables you to achieve financial security during your retirement years as a solo ager.

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