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Managing alone in retirement

By Jennie L. Phipps · Bankrate.com
Tuesday, June 28, 2011
Posted: 1 pm ET

Before economist Joanne Hsu's parents retired, they invited their 29-year-old daughter to sit down and examine their financial records.

"They showed me everything -- all their retirement planning. My father wanted to put my mind at ease that they almost certainly would never have to rely on me," Hsu said.

Hsu's mother is an accountant and the person who has always managed the couple's money. "My father used to joke that my mother could leave $300 on the kitchen table and walk out" and he wouldn't know what to do, Hsu recalls.

That's role reversal for most couples in the United States. When Hsu became a researcher for the Cognitive Economics Survey at the University of Michigan, which studies family money management, she was surprised at how unusual her family was. When it came time to choose a topic for her doctoral thesis in economics, she decided to study a related subject: What happens when a wife who hasn't been very involved in a couple's financial decision-making is widowed?

Anecdotes and some statistics available before Hsu began her thesis research suggested that wives don't prepare for the likely death of their husbands -- women outlive men by an average of five years -- and widows don't do a good job of managing money. Hsu's study offered a different view of this situation.

She found that 80 percent of wives who are part of a traditional couple do begin to learn more about the family's money and take over more control of it when their husband's health falters. When they are ultimately left on their own, these wives are likely to be successful managing their money in retirement.

Those widows who don't successfully manage their money are usually hampered by two factors:

  • The husband died unexpectedly, leaving them with no knowledge and no time to learn.
  • The husband was a poor money manager himself and left his wife with a financial mess.

The obvious lessons from her findings, Hsu says, are that both halves of a couple should be involved in financial decisions. If one of them is the primary money manager, he or she should insist that the other person learn about their situation and be familiar with the day-in-day-out processes of banking and bill paying, as well as knowing how much money they have and where it is.

It also behooves an aging couple to plan for the likelihood that one of them will be left alone. In many cases, that should include asking for outside help and analysis to ensure that resources remaining when one person dies will be sufficient to support the person who is left behind.

If your daughter is an economist, you can just call her.

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3 Comments
SPRINGSGRANNY
August 16, 2011 at 3:03 pm

Been there, done that. Married 46 years and did all the bills, etc for the first 21. My husband took over in year 22 up to his death in 2007. I didn't know how much we were in debt until he died within 5 months of diagnosis of a brain tumor. Between the debt before the diagnosis and the medical debt, I was drowning. I contacted the hospitals, doctors, rehab facilities, credit card companies and anyone who would listen and managed to get most of the debt excused because there was nothing but Social Security coming in. Had to give copies of bills 3 months prior to his death to all. Did have to pay 7 ambulance trips and several doctors who would not excuse anything, but at least I could see the light. Got a full time job and went on austerity. Managed to clean all bills up in 2 years. Will NEVER carry a balance on a credit card again. I'm fine as long as my health holds up. I'm so proud of myself now!!!!

Homeless
June 29, 2011 at 1:46 pm

This topic is important for EVERY couple...not just those that are aging. It happens everyday, one spouse is left behind by death (or at younger ages it's more often DIVORCE) and they have NO idea what's what.

Couples need to work together on money and all the decisions involved. Even if one is overall responsible, the other should be able to pick up right where the spouse left off.

This is DOUBLY important for Stay At Home moms! They should make it clear that just because they stay home does NOT mean they should not get a vote in how finances are managed and they need to know where EVERYTHING is!

ngan
June 29, 2011 at 1:26 pm

First off...To Joanne Hsu: Go Blue! :)

Second, it's the reverse in my household. I'm the financial manager and my husband is not. It ended up that way because when we got together, I was the one who owned the house and therefore dealt with mortgages, taxes, utilities, and budgeting. We kept it that way because it was easier than starting over.

If something happened to me, then my husband probably have a hard time figuring out what is what and where they are.