What will happen to your wife’s retirement income if you die early?

Gee. There’s an exciting fun topic to talk about, right?

Put that right up their with Ebola and ISIS as fun dinner conversation.

Unfortunately death happens to everyone.

This post talks about what the impact will be on the surviving wife’s income if the husband dies early.

I’m, writing this from the perspective of the husband being  the main breadwinner, but you could easily switch the roles around.

On average the surviving wife’s retirement income drops by 42%.

That number was gathered from 1,000s of income assessments using the software I use.

As morbid as the thought is, there’s 3 things that make it an interesting topic for people

  • They have never really thought about it
  • They have never seen the numbers in a clear simple format
  • Husbands don’t want to leave their wives in a bad situation

So let’s take them one by one.

Never thought About It

Here’s a few Social Security Fun Facts

  • In 2014 over 59 million Americans will receive almost $863 Billion in Social Security Benefits
  • The average retired worker gets $1,294 per month
  • Social Security is the major source of income for most of the elderly.

http://www.ssa.gov/news/press/basicfact.html

From what I see around Chicagoland  the Social Security numbers are usually higher than that.

I would say the average husband is getting $2,000 and the average wife is  $1,300. That’s just a rough estimate of what I see.

So what’’s the problem.

Let’s say the husband is getting $2,000 and the wife is getting $1,300.

So the total household Social Security is $3,300

If the husband dies at 75. the wife loses the lower Social Security

The total household Social Security drops from $3,300 a month to $2,000 a month.

That’s about a 40% drop in retirement income. Ouch.

Will that be enough for her?

Yes the bills will be less.

  • Less food.
  • Less health insurance
  • Maybe get rid of one car

But there are expenses that will stay the same

  • Property taxes
  • Electric-Gas Bill
  • Cable bill
  • Phone bill

QUESTION: What would the numbers be in your household?

Pensions

Everyone wishes they had a big enough pension to cover their living expenses for as long as they live.

Unfortunately the age of the pension seems to have gone away.  Unless you work in the public sector.

So what’s the problem with pensions for a retired couple.

Nothing as long as the pensioner is alive, but what happens if he/she dies.

What’s the “Survivorship Percentage” on the pension.

  • If it’s 100% then your wife will keep getting all of it.
  • But what if it’s a 50% survivorship.
  • What if it’s a 0% survivorship.

The results from the last 3 Income Assessments I’ve done are this

  1. ZERO % survivorship
  2. Didn’t know.  I told him to check.
  3. Not getting a pension at all

So let’s continue our example and let’s add in a pension.

  • Husband Social Security $2,000
  • Wife’s Social Security $1,300
  • Husband’s pension $2,400 a month with a 50% survivorship.

So now the total retirement income while you are both alive is $5,700 a month or $68,400 per year.

Now let’s say the husband dies at 75.

  • The wife loses the lower Social Security
  • The pension drops by 50% to $1,200

Household retirement income drops from $5,700 a month t $3,200 a month.

Annually that’s a drop from $68,400 to $38,400.

That’s a 43% drop which from our studies is about average.

So will your wife be ok?

Income Assessment

Getting all this down on paper so you can see it clearly,  really helps people

If you are good at spreadsheets you could build this out yourself. Make sure you factor in the following things.

  • Husbands Social Security and cost of living increases
  • Wife’s Social Security and cost of living increases
  • Pension income
  • Illustrate pension survivorship %
  • Map out what happens if husband dies at different years 70,75,80
  • Also Map out if wife dies at different ages
  • Be able to add in other guaranteed sources of income, if you have them.
  • Have a column of Total Income so you can see if you have any shortages or problems

Or if you aren’t very good at building Excel Spreadsheets, and you would just like an Income Assessment done for you , click here and you can see an example of the software I use and there’s place you can request your own income assessment.

Click Here For Info On Income Assessment

Husbands Don’t Want To Leave Their Wife In A Bad Situation

I don’t have to go into this one too much. I think it’s self explanatory.

One thing to think about though, is if the husband handles all the money stuff, makes sure you wife know where things are at.

It can be a real mess for the surviving family when they can’t find stuff.

  • Account Numbers
  • Phone Numbers With Contact Person
  • Life insurance Policies
  • IRA Statements
  • Annuity Statements

Taking a few minutes to get all of that a little organized will really help your family in the event something does happen.

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