Help your wife plan her widowhood

By MarketWatch

Memo to Bartlett's: Add an asterisk next to Ben Franklin's quote that "in this world nothing is certain but death and taxes."

We can also be sure that most husbands will die before their wives do. According to the U.S. Census Bureau, about 80% of women live longer than their spouses and often by many years -- 14 years on average.

Given those facts, it would seem that husbands would do more to ensure their wives' transitions to widowhood didn't result in poverty. But that's often not the case, according to a report (.pdf file) by Boston College's Center for Retirement Research.

Though the old-age poverty rate is only about one-third of its mid-20th-century level, the poverty rate for widows remains high. Nearly 30% of unmarried women 65 and older are poor or nearly poor.

"Of all the factors associated with poverty in old age, the most critical is to be a woman without a husband," according to the center's report.

That's a big problem given that nearly 800,000 women become widows each year and that the U.S. has more than four times -- 11.3 million versus 2.6 million -- as many widows as widowers.

Why are so many widows poor?

"One reason is that widowhood creates economic hardship, as Social Security benefits and pensions from employer-sponsored plans drop," the report says. "In addition, those most likely to be widowed have lower incomes than intact couples even before they lose their husbands. Their lower incomes reflect less education on the part of both the husband and wife and poorer health on the part of the husband than couples that remain intact."

So what should husbands -- assuming they truly love their wives -- do about this?

1. Delay retirement

The first order of business is to address Social Security and pension benefits.

"The most obvious reasons for a decrease in women's income upon widowhood pertain to Social Security and pension benefits," according to the report. "When the husband dies, the couple's Social Security benefit is cut by between one-third and one-half. The couple's private-pension benefit either disappears completely or is reduced."

One way to offset that problem is for the husband and wife to retire later.

"Retiring later may provide for a higher employer pension benefit, if applicable, and offer the opportunity to sock away additional savings for retirement," Wendy Roy, the director of survivor financial counseling services at Ernst & Young, wrote in an e-mail. A higher earnings level can also lead to higher Social Security benefits.

2. Start a business together

It might make sense for a husband and wife to start a business together.

It offers a chance to open a company retirement plan, including an individual 401k plan, said Jacob Herschler, a vice president at Prudential Annuities.

3. Cover health care costs

Make sure health care costs are covered, including Medicare Part B, Medicare Part D and long-term care.

If the husband and wife are still working, they should consider buying policies for long-term-care insurance, either through their employers or in the open market, Herschler said. They should especially consider doing so when they are in their 50s or 60s, when the premium costs are lower.

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In addition, husbands and wives should consider how they would fund health insurance costs if they retired before becoming eligible for Medicare.

4. Talk finances

A husband and wife should work as a team on household money matters, according to Paul McClatchy of eMoney Advisor, a financial planning unit of Commerce Bancorp.

"No matter if it includes the household budget, a new car purchase or saving for a future goal; both ought to be involved in the decision-making process," he wrote in an e-mail. "Too many times one spouse bows out of this responsibility by stating that 'they just don't have the head for numbers.'"

It's fine if one spouse is more comfortable with running the household finances, but the other spouse ought to know at least what thought processes went into financial decisions. Most importantly, both spouses ought to know where important financial documents are kept, including wills, house deeds and insurance policies.

Also, there are many good programs couples can use to help with household finances, such as Quicken.

Continued: Fund a spousal IRA

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