Are you prepared for the death of your spouse?

Death is one subject that people are, understandably, reluctant to discuss. You’d rather share dreams of how you will spend your retirement together than plan to face the future alone.  But facing this tough issue now and making plans for it may bring peace of mind and allow you to enjoy your retirement that much more.  During the planning process, a couple should sit down together and make a checklist of the income that will exist before and after the death of each spouse.  Developing a financial strategy for the surviving spouse will help to avoid any potential shortfalls that could occur.

One consideration to keep in mind is that women survive their spouses more often than men. The Administration on Aging estimates that almost half of all older women in 2006 were widows, and there were over four times as many widows as widowers.¹ Also, women earn less than men at every educational level, in every field.  The wage gap is even larger for women of color and is more pronounced for older women.  Because of these factors, women are more likely to receive less in benefits from company pensions, 401(k) plans and Social Security.²

Various estimates indicate expenses after the death of a spouse will be reduced by only 20%. A widow's benefits under her husband's pension may be reduced by 50% on his death, or, depending on the payment elected, benefits may end entirely, leaving her in a precarious financial position. Additionally, elderly women have a higher risk of extended illness or disability. Because fewer women qualify for health benefits as a result of less time in the workforce or health benefits from her husband terminate on his death, this can put an even greater burden on her retirement income.³

If the surviving spouse or their children are eligible, Social Security may provide some benefits. However, benefits may be reduced based on age. If the surviving spouse is a named beneficiary of a 401(k), there may be options available and proceeds may be rolled into an IRA, if appropriate.

If you foresee potential shortfalls in your retirement income or that of your spouse should they survive you, you may wish to begin an investment or savings program that takes advantage of the financial products available at State Farm®. Whether it is a tax-qualified retirement plan, savings account or certificates of deposit, the sooner you start, the more time you have to work toward your goal.

You may invest in financial products that have contribution options as low as $50 per month in conjunction with an Automatic Investment Plan. With the help of your registered State Farm® agent, you can set up an investment program that automatically withdraws a pre-determined amount from your designated account at regular intervals you specify. Your registered agent can assist you in determining the investment opportunities available depending on your goals and tolerance for certain risks.

*An automatic investment plan does not assure a profit and does not protect against loss in declining markets.  An automatic investment plan involves continuous investment in securities regardless of fluctuating prices.  You should consider your financial ability to continue purchases through periods of high or low price levels.

State Farm Agents do not provide tax, legal or investment advice.

¹ Agency on Aging
² Professional Women: Vital Statistics
³ WISER - Women’s Institute for a Secure Retirement

State Farm VP Management Corp Risk/Important Disclosures. State Farm Mutual Funds Prospectus. The State Farm College Savings Plan Enrollment Handbook (PDF 276 KB).

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AP2009/03/2448