Divorce - IV

What widowhood can do to personal finances: Take note of the first item on the list: Your expenses as a widow are likely to be 80 percent of what they were prior to your husband’s death, but your income may only be 66 percent of what it was before. And that’s not all. If you are an older widow, the death of a spouse can cut your widow’s pension benefits by 50 percent. You used to receive both his and your Social Security retirement benefits. Now, you receive only the higher of the two, and this can be a cut in total benefits of one-third or more. On the positive side, the Social Security program provides a safety net for widowed women with children. As a young widow, you can collect benefits until your children are age 16 and the children themselves can collect until they are 18. Survivor’s benefits can also go to a widow age 60 or older, children younger than 18, disabled adult children, and dependent parents. Note: An older widow’s benefits continue throughout her life; survivor benefits for young widows with children, and survivor benefits for children, end when the children reach age 16 and 18 respectively.

Widowhood and pensions: Most of us don’t want to talk about death with our spouses, but it’s important that we do, especially when it comes to pension benefits. Be smart. Find out everything you can about your spouse’s pension and survivor’s benefits. Federal law requires company and union pension plans to provide a joint and survivor’s benefit option; as a wife, you should not give up that benefit unless you have your own sources of retirement income. Taking the joint and survivor option means that the pensioner has an option of taking a larger payment during his lifetime, or taking a slightly smaller one, which then provides a survivor annuity for his spouse. If you have no independent source of income, you should never give up your right to a survivor pension even if it means living on slightly less during your husband’s lifetime. (Giving up that right must be done in writing.) If your husband dies, and you have a survivor benefit, you will get a portion of his pension benefit amount. If the two of you did not choose the joint and survivors benefit, his pension stops at his death, and you, the widow, get nothing. The law applies different rules to retirement savings plans such as 401(k)s. Death benefits from the 401(k) are usually paid out in a lump sum. There are tax consequences if you, as a widow, receive a lump sum before you are age 59 ½. Consult with a tax lawyer or accountant and roll the money over into an Individual Retirement Account (IRA), or put money aside for taxes if you need to use some of the money for expenses. A few dollars spent on a good accountant or a lawyer could save you thousands in unnecessary taxes later.