TRANSCRIPT
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#69 - Navigating Life After Loss – Part 3: Planning Your First Year with Clarity and Care
Eric Blake: On today's show, we will conclude our three-part series on navigating life after the loss of a spouse. We're also gonna address the traditional advice of don't make any major financial decisions in the first 12 months after losing a spouse. Is this good advice or not? Welcome to another episode of the Simply Retirement Podcast, where we want to empower and educate women to live your retirement.
On your terms. I'm your host Eric Blake, practicing retirement planner with over 25 years of experience, founder of Blake Wealth Management, and I would not be the man I am today without the women in my life. Over the last two episodes in navigating Life After Loss we talked about the immediate to-dos after the death of a spouse.
What to focus on. Also within the first couple of months. Today we're gonna talk about that first full year. When you start to see some of that fog start to lift, uh, life starts, of course to feel very different, but there are some decisions that become more urgent while there's others that can wait. And the challenge, of course, is knowing what the difference is.
Joining me once again is Wendy McConnell. Wendy, how are you? I'm good. How you doing? I am good. So real quick, I've, I announced last week that we, uh, we brought my daughter on to join the team, and of course, this week means she's training, she's getting a handle on all the technology and getting her computer set up.
Okay. My wife doing all the stuff that my wife typically does, which means I don't know how to do it. Which means if they're working together, guess who's, uh, responsible for, uh, grandbaby.
Wendy McConnell: See? And you thought you were gonna have a break?
Eric Blake: Yeah, it's been fun. It's been awesome. She, so she's, uh, she loves being outside, which is a good thing.
So we take long walks, we play outside. We got this little splash, splash pad we set up on the driveway for her. So she's able to keep herself pretty busy. So we're all good.
Wendy McConnell: Hey, I wanna take a dive in that splash pad. That sounds fun. It's not
Eric Blake: very big. It's big enough for, uh, for an 18 month old.
That's about it, though. Bummer.
Wendy McConnell: All right. Next time.
Eric Blake: But she has a good time with it. So
Wendy McConnell: good.
Eric Blake: Before we dive into today's main topic, I wanted to revisit the conversation we had on social security, uh, that we touched on the last episode because I, I think I, I'm not sure how clear I made that. So what happens if the spouse passes away and they receive social security benefits?
What happens in that first month or two? So I thought it'd make it hopefully as, as clear as mud here with this. So the bottom line is what you wanna know is that the, if the spouse lived the entire month, they are due a social security benefit the following month. Again, social security pays in arrears, so just we're recording his in August and early August.
So if the spouse lives the entire month of August, they are due a social security benefit payment in September. However, if they were to pass away in the month of August, they would not,
Wendy McConnell: okay.
Eric Blake: They would not get a payment in September. Now, the tricky part is in many cases, the banks will return that payment no matter what, whether they do or due the payment or not.
So that's where some of the confusion comes in. But if they enlive the entire month and they receive the payment in the following month, you'll get to keep it. However, if the bank withdraws it. Because again, they're worried about fraud and all those kind of things. That's where that form 1724 would come in the SSA Form 1724, where you would apply either to have the estate or the surviving spouse return, have that payment returned to them.
Wendy McConnell: Okay. I understand. Is that clear? Yes.
Eric Blake: So basically it's, it's, did they live the entire month or did they not? That will determine whether they should receive a payment in the following month, and that's hopefully that's as as clear as I can make it at this point.
Wendy McConnell: Yeah. Well, you know, it's tough. I understand.
Eric Blake: Okay, so now we wanted to talk about you. Obviously there's, you know, once you get past this in some of the initial paperwork, some of those decisions that have to be made relatively quickly the rest of the year is often where some of these bigger questions emerge. What things are gonna look like ongoing.
Uh, obviously there's kind of a sense of settling. There's still gonna be those emotional, that emotional piece of it that's gonna be involved. But this is when, again, you gotta start thinking about the long-term, long-term planning that comes in. It'll start to stake, take shape there. And we wanna talk about how to navigate that hopefully as clearly and confidently as reasonably possible.
And again, that's where I wanted to talk about this advice that you hear quite frequently, which is don't make any major financial decisions in the first 12 months.
Right.
But here's the way I would, I would try to think about it as best you can. I know how difficult it is 'cause we've unfortunately gone through this in a number of situations with clients recently.
But really it should be try to avoid emotional decisions in that first 12 months.
Wendy McConnell: Okay?
Eric Blake: And that doesn't, again, doesn't mean you should do nothing. In fact, some, there's just gonna be some things that can't wait. So we know that grief can cloud your judgment. It can be extremely difficult to separate emotions from choices in that first year.
So ideally, we wanna just pause, evaluate your options as logically, as reasonably possible. But I think this is also where having, getting trusted advice can make a huge difference.
Wendy McConnell: Okay.
Eric Blake: And here's the way I think about this is in most cases, and this is through my experience over the last, you know, 25 years of being in this business, what's interesting is that it's the planning that was done before death that impacts those decisions in that first week, in that first month,
right?
That's what we're talking about. Did we have a will? Did we have our estate plan in place? Did we have the right beneficiary designations and ownership on our retirement accounts and on our investment accounts? Did we have life insurance? Was it titled correctly? All those are decisions that have to be made prior to death to make life as smooth as reasonably possible.
And then it's the planning after death. Obviously that's just as important. But that's where that first year, that's where the planning really comes into play. When we start thinking about questions like, you know, what should my beneficiaries designations look like now? Who should they be? Who's gonna serve as my executor now that my husband or has or spouse has passed?
Who are my trustees going forward? What are my income sources gonna be and what's the most tax efficient way to utilize those income sources? Should I apply for social security benefits? And if so, when uh, should I stay in my home downsize rent? What should I do as far as my living arrangement? So that's where those first year questions start to come into play is that planning after death, but that planning before death.
That's, again, that's what makes those, that first week or first month extremely difficult, or at least somewhat manageable is what planning was done prior to that. Does that make sense? Yeah, absolutely. As we start looking at some of these different variables, we want to think about, here's one that is so critical, but most people don't realize how critical it is, and that is tax filing status,
right?
So when you think about in the calendar year that your spouse passes away, you are still able to file married finally jointly. But in the following year, unless you have dependent children, you're gonna be filing a single most likely. Again, there are certain circumstances where that might be different, but for the most part, that's gonna be pretty much rule of thumb.
And again, it may not seem like a big deal, but it can dramatically affect your tax situation, especially if it's possible that you might find yourself in a higher tax bracket in the future with fewer deductions, even if your income may drop a little bit. We talked about that in episode 66 when we talked about the widow's penalty and what the implications are there.
So in that first year, and again, it's always dependent on when the spouse passes. Unfortunately you get that always come into play. Right. Did they pass away early in the year where he gives you a little more time to think through these things or later in the year? Uh, I shared a story a couple episodes ago, I believe it was on, you had a client, she passed away in December and there just wasn't any opportunity to do anything.
And it's not something you can force or you that you can push through in any way. This is where you might think about things like Roth IRA, conversions. If you think you're gonna be in a higher income bracket or high higher income for whatever reason in the future, should I start converting some of that taxable money into tax-free money?
Wendy McConnell: Okay.
Eric Blake: Capital gain harvesting meaning, okay, I might, if I've got some highly appreciated stock or mutual funds or whatever it might be, should I think about selling some of that this year? And some of these may be related to your liquidity needs, but again, also, I'm talking here just from the tax standpoint.
If the tax brackets are higher because you're filing married your tax ranges are higher because you're filing married jointly versus what they would be when you file single in the following year. That's really what we're talking about is can I recognize some income at these lower brackets versus what I think I might be in in the future.
Wendy McConnell: Okay.
Eric Blake: And even this year, like 2025, we've now have the new over age 65, $6,000 deduction. If your spouse passes away in 2025, you might actually get a total of $12,000 in deductions between the two. If both spouses are over 25.
Wendy McConnell: Yeah,
Eric Blake: if you're over 65. 20, 25. Yeah. In the year
Wendy McConnell: 2025.
Eric Blake: Right. So if you're 65, if both spouses are 65 or older in 2025, you may get a total of $12,000 in deductions.
Whereas in 2026, you're gonna probably lose one of those. And again, depending on your income situation, if your income is too high, you might lose them all together. And that's again, a very reasonable, and it's a very possible circumstance, right? I think for a lot of people understood. There are also even some cases where it may make sense to incur a higher one-time tax bill in that year of death in order to reduce tax burdens for future years.
Where you might say, I might do a really big Roth conversion in the year of death in 2025 to avoid having higher required distributions in the future, or being taxed at a higher rate. And so that's really where, again, the planning becomes so critical and why working with a tax savvy retirement advisor becomes so important, especially if those decisions might have to be made relatively quickly before year end.
Wendy McConnell: Yeah. I mean, and that's, that's important to point out because, you know, I certainly wouldn't know if, if it would be beneficial for me to, pay more this year so that I can pay less in the future. I mean, so yeah, keep that in mind.
Eric Blake: Well, and the, the confusion comes 'cause you, you don't really even think about that.
Why, why would I start thinking about 20, 26 and 20 if my house spouse passes away this year? Am I really thinking about what my tax situation is gonna be in 2026 and 2027? Most of the time you're not. But it's, again, bidding on the circumstances. That's where it is such a critical window of time that you have available to you to make some big decisions and trying to go through that while you're still on their emotional rollercoaster for losing a spouse.
It's just so challenging and again, you, you understand why it doesn't happen. You just hope that you have people on your side that can help navigate to help you navigate those decisions going forward.
Wendy McConnell: Exactly.
Eric Blake: So then we start talking about rebuilding your financial foundation. And again, this is what, that's kind of, once we get some of that urgent tax planning type stuff out of the way, and then you start be to rebuild your longer term financial future.
This is where we start talking about reviewing your income plan, updating your withdrawal strategies if consolidating financial accounts, if you know, if your spouse had an IRA and you've got an IRA, do you need to consolidate those into a single IRA, depending again on your income needs and your tax situation.
Again, you wanna start updating ownership and beneficiaries on your accounts and your life insurance policies. You also wanna reassess your own investment allocation and risk level depending on who is handling some of those or who might be the key factor in those decisions on how you are investing your money.
You might be much more conservative or even be more aggressive. So what changes should you make to your own investment strategy as well going forward? Uh, you wanna think about, you know, what you're establishing and rebuilding your own credit, depending on those circumstances. You know, if, if a lot of this stuff was in your spouse's name, you might not have a credit score or you might need to build your own, you build your credit score up and things like that that you get, you just don't think about when you, especially as you start thinking about housing decisions, where that might come into play.
But it's where you start, where you wanna start defining your specific goals. And whether that means you want to travel, you wanna downsize your home, you wanna support family, you want to, you gotta adjust your retirement timeline depending on where you're at, what your, how old you are, and whether you are retired or not.
You gotta start factoring and when and am I going to be able to retire? When would that be? So those are some of the decisions you wanna start making as well. Yep. We touched on the last episode, we talked about filing for survivor benefits, uh, but I think it's also actually critical to talk about it here as well when you're talking about if you're eligible for survivor social security benefits.
When should I think about starting those? And again, I'm not gonna spend a whole lot of time here because we did talk about 'em a lot in the last episode. But just knowing what your eligibility, what your amounts are that you could be eligible for, and start thinking about when is the right time to file for those benefits.
And again, as I referenced in the episode, as last episode as well, go back and take a look at it or listen to episode 37, top five Questions on Social Security Survivor benefits. And that'll give you a lot more direction, a lot more insight as to what your options may be there.
Wendy McConnell: Mm-hmm.
Eric Blake: And of course, a big one is gonna be evaluating your house and your lifestyle, your long-term goals.
Where you live and how is gonna be one of those, the biggest financial and emotional decisions you're gonna face going forward? You gotta start thinking about whether your current home is affordable, is it manageable and is there, is there an emotional connection that you want to keep? There's nothing wrong with staying, of course, but if it's too big, it's too costly or it's just filled with painful reminders and memories and it just, you might just think about, Hey, I, I just gotta move.
And we talked about this a lot in episode 60 where we talked about should you downsize or rent in retirement, but a lot of that was around some of the, actually we touched on the financial aspects of that decision, but we also talked about a lot of the emotional and the lifestyle aspects of that decision.
About, do I want to travel more? Do I want to live near an airport because I do want to travel? Or do I need to be close to family?
Wendy McConnell: Okay.
Eric Blake: Uh, what is it what I want life to look like going forward? And again, you may not have, you're probably not gonna have it all figured out in that first year, but you're, the wheels will start spinning.
You're starting to kind, having these thoughts about, well, I, I gotta start. What I start to move on? What do I want my life to look like? And actually, grief is gonna be there. You, you're never gonna be the same. You're never gonna, there's always gonna be something missing. But as you start putting those pieces together, thinking about what do I want to do?
How do I wanna support myself? How do I wanna support my family? How do I wanna support my community?
Wendy McConnell: Yeah. You know, and it's interesting. Things can change over time too. I had a neighbor who lost her husband suddenly, and we were all nervous. We're like, are you gonna move? And she's like, no, this was our dream home.
You know, I'm gonna. Day here. And, you know, within two years or so, she was too far from her kids and she just didn't have a lot to do and she just decided, I, it just, I just need to be closer to my kids. So, you know, after about two, three years, she decided to go ahead and move. So things change too. So always keep that in mind.
Eric Blake: Well, and that's where the, you know, that 12 month window is just, it's just a time. That it is thrown out there.
Wendy McConnell: Right?
Eric Blake: There's no significance behind it other than, again, the ideally not making emotional decisions within that 12 months. Because you think about her situation of, well, if she just say, okay, I'm pulling the trigger six months in, she might've regretted it at that time.
Exactly. But as she gave herself time to digest things and just kinda get her wits about her problem, most likely it's just, Hey, okay, this is just not the situation I wanna be in. And you never know what those emotional components are gonna be because it, it could vary between. I wanna stay here because this is where we raised our kids.
This is where we, we, our life was spent together. Here. I wanna stay. Two. Everything I see reminds me of him, and I just can't handle that. I can't handle it from an emotional perspective. You never, and you never know how I, you're never gonna know. As many times as I've seen this, you, you never know which direction people are gonna go.
You have, might have an idea, but there's many times they, they, the individual just goes completely against what you thought they might do. Because you just don't know what that's gonna, you don't know what the emotional response is gonna be, and you see it on both ends of the spectrum. Again, those are some of the big pieces. There's some things that you, when you start looking at your own situation that may be important. So these are just some, I would call it customizing your own life and your legacy. Once you've kind of gone into the, the planning phase and re rebuilt your financial plan as to what that might look like, there are a lot of these little smaller, personal, emotional, I call 'em, administrative tasks as well that might surface during that first year.
And I just wanted to touch on a few of those. So things like, you know, contacting religious or community organizations for support. Again, that's a part part of where that community, of what part, what community you want to be in, what do you, what kind of support do you need going forward? 'cause again, it vary based on each individual situation.
Whether, you know, those first 12 to 18 months, you're kind of able to move on emotionally, or if it's many years down the road, what support do you have behind you and who, what do you, what is that gonna look like? Some of these other smaller details that you think even like updating your address for having mail forwarded, depending on whether you do decide to move or not.
Prescriptions, this is one that I, you know, a lot of gets overlooked as well. If you had recurring prescriptions, your pharmacy those types of things that people don't think about as well. Retitling assets, valuables, collectibles those become, again, there's an emotional component to that, but how do you need to handle those?
Uh, so we've talked about some of these in the past episodes, but safe deposit box. Any accounts that when your spouse's name, again, working through getting those taken care of, uh, again, that's a lot of where the titling that pre-planning, whether it was done or was not done, comes into play. Again, I've shared this on a couple of episode, couple of parts of this, uh, episode of.
Uh, the husband had a few different investment accounts that were just in his name with no beneficiary designation. Again, fortunately they had the estate plan, they had done their wills. They'd gotten all that in place, so that process was much easier for her to get those accounts moved into her name, which again, just using some of these concepts we just talked about, she was able to use the money to pay off her mortgage.
Which for her from a cashflow, cashflow perspective was huge.
Wendy McConnell: Yeah. But isn't like the beneficiary, like a required field at this point. Like you even set these things up with getting away with not designating one beneficiary.
Eric Blake: The key is what was the source of the money? So for him, this basically, so he is, he is been in the tech world, so, h Hewlett Packard and all the variations of that.
So what this was was multiple accounts with different stock accounts from these different employers that he had. Okay. Some of which had been sold and were turned into something else. So they weren't IRAs. I gotcha. So that's where, again, depending all it depends on the source of the funds, of what type of account it is.
Are they IRAs or Roth IRAs or they just brokerage accounts, which for him, that's what these were. They were, I think, what, four different ones. Again, all the same kind of stuff. A lot of, a lot of the same stocks were in the same account. Just 'cause they had. As the, his transition to different employers, he just held onto 'em, but they were stock accounts where he'd like stock purchase plans.
Wendy McConnell: So don't take for granted that that's not an issue for you. Just, the estate plan is what really saved the day that time.
Eric Blake: Exactly. Absolutely. Because again, depending on the asset, whether you, now you could, he have put a transfer on death on him possibly. But again, that's one of the things you just don't do.
So again, fortunately enough. He was able to, they were able to get their wells done, get their estate plan taken care of. So the probate process of getting all that sorted out was relatively easy for her. And we were able to walk through that with her so that again, by the time we get everything moved around, got it situated the way where it needed to be in her name, now we could have that conversation about, okay, do we think about paying off that mortgage?
And for her, it ended up being that that was the appropriate move because from a cashflow perspective, it would've been really difficult. To maintain her daily expenses and just her ongoing lifestyle and try to be continuing to make that mortgage payment and just wanted, right, okay.
Wendy McConnell: It
Eric Blake: would've played she probably could have done it, but it would've made things a lot more stressful, I think, from a financial perspective.
Wendy McConnell: And you don't want that at this time. For sure. Exactly. And
Eric Blake: that, because again, we talked about that as well, when there's financial burdens that are all part of this, that makes the, the feeling of, and not only the emotions of losing your spouse. But now you've got maybe anger creeping in, or doubt or worry, all these other things.
Just kind of combining into this perfect storm of I just don't know what to do. I dunno where to go. I don't know who to turn to. And so that's really the di difficult part. Again, again, we talk about that pre-planning of making life easier and that first week in the first month happens before death.
These things we're talking about are more of those things that happen after. And your plan going forward, what's the rest of my life gonna look like? Got it. Uh, some things like travel documents or, you know, emergency contacts, you know, we always, we always have these emergency contacts. We have to fill out what, depending on what's going on, if we're taking a trip or if we're, whatever we're doing, making sure you're updating those.
Who is that gonna be now, is it gonna be, you know, a child now, an adult child that's gonna take that role? Who does that need to be? Uh, again, we've touched on doing, making sure you update your own estate plan, your own beneficiary designations. Start thinking about, you know, long-term care, long-term healthcare assisted living.
What are my living arrangements gonna be going forward? If it's just me do I have adult children that can help take care of me? Or do I need to think about what that's gonna look like on my own? Some of the things also is just, you know, what type of charitable inclinations do you have? Do you wanna do a, some, set up, some type of a memorial for your spouse?
So all these types of things, it's not something you're, it's gonna even cross your mind probably in the first week or the first month. But as we transition through that first year and on, that's where some of these things, these things might come into play. Things you might wanna do to remember that person as you move forward.
Yeah. And again, I think the other thing is, you know, you don't have to do everything now as we've talked about, one of the things that really, again, is the planning the lack of planning prior to death is what often creates the urgency around some of these decisions that could otherwise potentially wait.
So I think that's part of what you want to con consider is if, if you're, if you are married now, what are the things that you should be doing to prepare in advance? 'cause again, we know that very unlikely that both spouses are gonna pass at the exact same time. One or the other is going to be a, we'll call it a solo age.
So what is that? What are you, can you do now to prepare to make life easier when that time comes? I like that. Yeah. Anything you, I else you would add, Wendy? It's as far as anything you missed or that I felt like I missed. Again, every situation is different. I think that's the thing to, to know is you're not right or wrong based on what you think is a priority.
It's just whether those priorities force you into decision sooner rather than later.
Wendy McConnell: Yeah, I mean, you know, I think you covered it well. It's just, you, there are all kinds of issues that you may not even think of that could, you know, make things more difficult or easier for you.
Eric Blake: Well, and I think that's really why the guide is there that we created, the guide that we'll share.
I'll talk about that in just a second. But that's really what that guide is for, is to give you a checklist of things that you might not otherwise think about. A lot of these things are gonna be relatively obvious, but in an emotional time, you just might not think about 'em until it's too late. And that's really what we're trying to avoid is making those, having to make quick decisions because you weren't aware of something.
And so by having the checklist, having things that you can go, did I, do I need to do this? Do I need to do that? Of course, the organizer that's in the back, that's gonna allow you to gather a lot of these important items, whether it's contact information for professionals that are in your life, doctors, CPAs, financial advisors, important documents, where are all, where is all your stuff.
Mm-hmm. Uh, making sure that you have a place you can start gathering those again, whether you decide to gather those and put all that information together in advance. Or if it's just someplace you can go after the fact once if you have lost a spouse and you're trying to just figure all this stuff out and get everything organized as you try to make the best of your life going forward.
Wendy McConnell: Yep. Okay,
Eric Blake: so just a quick summary. We'll run through some of these, the key bullet points that we talked about. So again, ideally avoid emotional decisions in that first 12 months, but you do, you take action when it's needed. Again, understanding your tax filing window in that first year, in the first calendar year, you should still have the option opportunity to file married finally jointly, whereas you're most likely gonna file single in those years following.
So you wanna, if you can act before that window closes, act before that end of year of death. Again, start rebuilding your financial foundation with updated goals and strategies that are specific to you and things that you wanna accomplish. Uh, make sure that you, again, you properly, you take time to properly evaluate your survivor benefits and your filing options there with social security.
Reflect on where you wanna live and how you wanna live. What is that gonna look like going forward? Where you want to be, what do you wanna do, who do you wanna be with when you're doing those things? Then ideally, we're gonna customize the next chapter of life with confidence, clarity, and support. You want people around you that can help get you through these times, these difficult times, whether it's family, close friends or again, having professionals on your side of the table that can help you make some of these decisions or walk you through the information that you need to make an informed decision as well.
Wendy McConnell: Yeah, making the most of the time that you have left for sure.
Eric Blake: Absolutely. Well, as always, Wendy, thank you again for joining me. Thank you to all of our listeners for spending time with us today. Again, just as a reminder, we're gonna share the guide in our show notes for this episode. It's also gonna be on our website. You can go to TheSimplyRetirementPodcast.com.
If you are in that first year of loss and you'd like help getting organized, getting those next steps in place, we are here to support you. You can visit GetMySimplyRetirementRoadmap.com to review our Simply Retirement Roadmap process. This is our three-step process to help you answer those big questions, those big retirement questions, and help you make an informed and educated decision about whether we are the right firm to help you navigate this journey.
We wanna make sure that we help clarify what's urgent, what's optional, and what will help you move forward with strength. That is it for today's episode. Again, for all the links and resources discussed, you can go to TheSimplyRetirementPodcast.com. Hopefully, you found this helpful. Please like, follow, and share this with a friend.
Until next time, remember, retirement is not the end of the road. It's the start of a new journey.
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