Financial Advice for the
By Jennifer Leighton
Single happens. It’s not usually something we plan for and most of us don’t envision living life on our own. And yet, according to a recent census, more than one in four U.S. households are maintained by a single person. This isn’t particularly surprising given that one-third of the population over 65 is widowed and a first-time married couple has a 40% chance of ending up in divorce court. What may come as a surprise, however, is a New York Times analysis which found that, as of 2005, married couples are the minority of all American households.
Becoming single, especially when we are not expecting it, can be overwhelming – both emotionally and financially. While we are struggling with the feelings of loss and grief, we’re also pressed to make critical decisions which will impact our monetary future. In order to increase your financial security, here are five important steps to take should you find yourself “suddenly single.”
It is important to contact your bank and other financial institutions in order to update ownership of jointly-held accounts into your name. Both widows and divorcees may have to provide the necessary paperwork (a death certificate or divorce decree, for example) in order to make this change. Checking and savings accounts may seem readily apparent, but brokerage and retirement accounts need to be addressed as well. They will have their own set of rules when it comes to their transfer or division.
Review Insurance Needs
Life, health, and long-term care insurance can be crucial factors in your financial stability. Let’s look at life insurance first. If you are widowed and the beneficiary of a life insurance policy, you should receive your spouse’s proceeds tax-free and within a few weeks. In cases of divorce, it is always wise to insure the spouse who will be paying spousal and child support. In many cases, a (relatively) low-cost term policy will be sufficient.
If you received health insurance through your spouse, you’re entitled to continue coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA) for up to 36 months. However, COBRA is often very expensive (up to 102% of the cost of the plan) so it is always a good idea to look for other options – through an employer or individual plan – as soon as possible.
Long-term care insurance is a hot topic right now – and for good reason. One in three Americans will need long-term care at some point in their lives and that care can be extremely costly. If you are “suddenly single,” it may be time to consider this type of insurance.
Create a Budget
Divorce and widowhood can create tremendous financial uncertainty. A budget is the best way to get a grasp on your money. Make a detailed list of your monthly expenses, including all of your debts and liabilities. Once this is completed, you’ll have a clearer picture on how much you’ll need to bring in to pay for what’s going out.
Don’t Forget about Social Security
Many people are unaware they may be eligible for Social Security benefits based on a former spouse. Widows and ex-spouses are generally entitled to a maximum of 50% of their former spouse’s benefit, if those benefits are greater than their own. The rules on Social Security can be tricky so be sure to check with a professional who can guide you on eligibility and filing requirements.
Create a Long-Term Financial Plan
When loss turns your life upside down, focusing on the long-term can seem impossible. Simply getting through each day feels difficult enough. And yet, creating a plan to protect your financial well-being is crucial. Working with a team of advisors – including a CPA, estate attorney, and financial professional – will help you to protect your assets and focus on your future. No matter how it may seem at the time, there is life after loss. Your advisors can guide you in making wise decisions during this time of transition.