In a recent study, more than half of widows said that they and their spouse did not have a financial plan in place in case one of them died.

When I taught personal financial planning at the New School for Social Research in New York several years ago, most of my students were women, and more than half of them were widows.

One of my students was a Vogue editor who had recently become a widow. She wrote an article about how a widow "became educated about personal financial planning." After the article was published, I had the highest attendance ever in my class, more than 50 students, the following semester. Many of the widows in my class needed a crash financial education because their husbands had done a poor job of preparing for the fate that befell their wives.

Based on a recent survey conducted by Merrill Lynch and Air Wave, many widows face serious problems. The report, "Widowhood: The Loss Couples Rarely Plan for -- and Should," is based on a nationwide sample of 3,300 respondents, including 2,638 widowed and 741 married, never-widowed respondents. Currently there are 20 million widows in the U.S., and 1.4 million new ones are added annually.

More than three-quarters of the widows described the loss of their spouse as "their single most difficult and overwhelming life experience," and 53 percent said they and their spouse did not have a plan for what would happen when one of them passed away. These results are consistent with the feedback I received from widows who took my course.

Half of the widows in the study experienced a decline in income of 50 percent or more. There are many reasons for this. Social Security is one factor. A widow is only entitled to 100 percent of her survivors benefit if she has reached full retirement age (FRA). She is entitled to 71.5 percent of the maximum survivors benefit at age 60; between age 60 and FRA, the benefit is pro-rated. In order to receive survivors benefits, she must be unmarried or remarried only after age 60. Based on mail I receive, many widows are unaware of these restrictions. I should point out: These conditions apply to widowers as well.

If a widow initiates benefits at FRA or later, she receives a maximum survivors benefit of 100 percent of the payment the spouse received. However, if the deceased worker was receiving reduced payments because of early retirement, the widow's benefit would be similarly reduced, or 82.5 percent of the full payment amount, whichever is greater.

One crucial issue -- unfortunately unknown by many Social Security representatives -- is that a widow does not have to apply for benefits based on her work record at the same she applies for survivors benefits. She can apply separately for benefits based on her work record at a later time. This is very important! Widows, especially working widows, will receive greater benefits for their own work record if they apply later. If she delays filing for her own benefits after reaching FRA, they will increase 8 percent per year between FRA to age 70. Many widows would have received greater benefits if they received proper information.

Another important issue is employer pensions received by the deceased worker. In some cases (such as second marriages), the spouse is not entitled to any of the deceased worker's pension. In other cases, the widow would only be entitled to a small percentage of the pension.

Couples should estimate the income a surviving spouse will receive. If he or she is facing a loss in income, life insurance options should be considered. At age 65, I took out a 20-year term policy of $250,000 to protect my wife because she was not eligible to receive any of my employer pension. The cost was a little over $200 per month. Term policies are reasonably priced, even at age 65. At age 70, the stock market took a significant drop, and I took out an additional term policy of $50,000 -- again, to protect my spouse in case the stock market would not recover quickly.

Maintain good records for the surviving spouse. A record should be maintained of all insurance policies, including contact information of the agent(s), as well as stock brokers and mutual fund representatives. Many insurance policies (in the billions) have not been redeemed because beneficiaries were not aware of the policies.

(Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.)

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