From Two to One

Catherine Horiuchi

FOLLOWING MY husband’s death, I went from feeling prosperous to precarious in the space of a few short months. For decades, I’d had something extra in hand, beyond the minimum sum necessary to keep going. That sense of prosperity was now gone.

This wasn’t just my imagination. Studies have found that widows are significantly less wealthy than their married counterparts. One academic article notes, “The death of a spouse is an event that may precipitate a large decline in wealth.” Similarly, a National Bureau of Economic Research study found that, “The death of the husband very often induces the poverty of the surviving spouse, even though the married couple was not poor.”

For me, a decline in wealth might have been fine if our life had been just the two of us. After all, my husband would no longer be spending the money that he would no longer receive. Problem is, I have three children who are not yet grown, and everything else that goes along with a family of four.

Though we never expected nor precisely planned for an untimely end, it turns out that our work-life choices and hopes for retirement had created a financial buffer. We had saved a higher percentage of our earnings than many others and had done so for decades. Still, since my husband’s death, I have been anxious to avoid a steady decline in our family’s nest egg.

To that end, I’ve adopted a strategy for ongoing spending that I borrowed from a health care manual: “To lose weight, eat half what you now eat.” We all know how hard it is to slim down by merely consuming a little less. Our brains and bodies outsmart our best intentions. It seems that, if we want to shed pounds, we have to set far more radical goals. We’ll likely end up falling short—but falling short means we still make progress.

Cutting the family budget triggers the same psychological response and comes with the same pitfalls. While I haven’t figured out when or whether it might be necessary to reduce our family’s expenditures by half, it’s been a useful exercise to determine what would have to change for us to hit that target. I am reducing spending gradually as I see opportunities. For now, I want to limit the cuts to those things that are least visible to the children, so as not to disturb them. Still, sensible reductions will protect the nest egg that my husband and I worked so hard to accumulate.

Here are four suggestions for others who find themselves in a similar situation:

  1. Recognize that the surviving spouse’s lifestyle will likely need to change when the other spouse passes away. Make a plan for more than one possible future.
  2. Financial advisors often remind us not to use our retirement accounts to pay for college. Estimate the cost of putting children through college and launching them into the adult world. Amass savings or buy life insurance in this amount—and consider it separate from your retirement funds—so you protect the wellbeing of your survivors.
  3. Calculate your family’s total wealth as of the day your spouse dies. Use that as a baseline and thereafter keep an eye on total family wealth. Rather than simply watching your net worth decline, take action to slow and eventually stop any decrease. A lifetime of savings, once lost, is extremely hard to rebuild.
  4. It’s never too early or too late to save a bit more. Think of it not as cutting back, but rather as sending money forward to your future self for a time when you—or your loved ones—may have extraordinary need.

Catherine Horiuchi recently retired from the University of San Francisco’s School of Management, where she was an associate professor teaching graduate courses in public policy, public finance and government technology. This is the sixth article in a series. Catherine’s five earlier articles were At the EndThe AftermathWhen It RainsMuddling Through and Missing a Step.

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