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The death of a spouse can be emotionally devastating and make tackling practical matters challenging for widowed clients. A first task for advisors, then, is to help clients navigate day-to-day matters such as paying bills and guide them in updating insurance plans, wills and beneficiary forms. Later, when the client's immediate needs have been taken care of, the advisor should set up a time to review the client's overall finances.
One of the biggest questions most widowed clients face will be where to spend their remaining years. Some may want to stay in the house they shared with their spouse as long as possible, but many will see the benefits of changing their living situation. While it's a good idea to urge clients to wait six months to a year before making a major financial decision, you can begin evaluating housing options with them so that they eventually make the decision that best fits their financial and emotional needs.
Many people who have recently lost a spouse want to remain in the house they've been living in. Some clients may be resistant to change, and others may be unwilling to give up their emotional investment in a home. There may also be practical and social benefits to staying in a familiar community.
However, if the mortgage has yet to be paid off, widowed clients may face financial challenges. Help your clients check with their lenders to see if their spouse had an insurance policy on the mortgage that would pay off some or all of the remaining balance. Refinancing is another option: Just make sure your client understands that lower monthly payments typically result in a longer payoff period. Also consider that clients aged 62 and older who owe less than half the home's value may be eligible for a reverse mortgage, which converts their home equity into cash.
Moving into a smaller and less expensive home may make financial and practical sense for many clients. They may find that they simply need less space or don't want (or are unable) to put the time and energy into maintenance and repairs. Selling a house brings in money that can be used to downsize to a smaller house or condo. Energy costs will likely be lower in a smaller home, and many condo and townhouse communities provide maintenance services for reasonable fees. The money your clients save can then be invested in an annuity to help make up for income they may have lost when their spouse died.
Living with Others
Advisors should consider their clients' social portfolios as well as their financial portfolios. Social isolation, a danger for widowed clients, is linked to chronic illness and shorter lifespans.1 Shared living spaces can help alleviate loneliness and facilitate greater emotional and physical well-being.
Retirement communities have many advantages—as well as many tiers of service depending on residents’ needs and abilities. Some simply offer maintenance and community amenities, while others include meal and cleaning services. Transportation is often provided and residents have the opportunity for all sorts of social interactions, from attending lectures to playing games. While people who are forced by necessity into retirement homes might struggle to adjust, people who move voluntarily into retirement communities may be better equipped to adapt well.
Another option to discuss with your clients is sharing a home with one or more friends. Sharing the mortgage and other expenses can allow single people to maintain the freedom and autonomy that comes with living in a house. And living with friends brings a level of companionship and emotional support that widowed clients may otherwise miss out on.
Even for clients who have paid off their mortgages, housing (and associated energy and upkeep costs) is a major expense in retirement. It's also one of the most crucial lifestyle considerations for clients in the later stages of their life. Home is where the majority of retirees spend the bulk of their time. For many, it's the center of their social lives and a huge contributor to overall happiness levels. Advisors should take the time to help clients make thoughtful housing decisions with both their financial and emotional needs in mind.
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 Stanford Center on Longevity, "The Sightlines Project: Seeing Our Way to Living Long, Living Well in 21st Century America," February 2016.