There is a 48 percent chance that one member of a 65-year-old couple will outlive the other by 10 years and only a 3 percent likelihood that both halves of a couple will die in the same year, according to research organization LIMRA.
LIMRA derived these statistics from the Human Mortality Database, created by the University of California, Berkeley, and the Max Planck Institute for Demographic Research.
"Couple retirement planning has to include survivor planning," says Jafor Iqbal, associate managing director of LIMRA retirement research.
Iqbal says that two-thirds of the time, the survivor will be a woman. When her husband dies, she'll likely lose some Social Security. If they had a pension, the amount that she will receive on her own will be less than they got as a couple, and it could be zero. At the same time, expenses aren't likely to drop very much. Unless she moves, the cost of housing, which is a big part of many retirement budgets, will certainly stay the same.
Iqbal says couples structuring their retirement plans should calculate the income the survivor -- whoever that might be -- would continue to receive. Then they should figure out how much it would cost for either to live on his or her own.
They should make a plan considering these sources of income.
- Strategize Social Security. If the spouse who is entitled to the largest Social Security payment maxes it out by waiting until age 70 to claim, the survivor -- no matter which half of the couple it is -- will continue to get that amount.
- Purchase life insurance. Not only will life insurance mitigate the shortfall caused by the disappearance of other sources of income, it will also provide ready cash to help the survivor manage the transition.
- Structure pensions carefully. Choosing to take pension income in such a way that it continues to provide income to the surviving spouse can make a big difference.
- Consider long-term care insurance. When one spouse dies, there is often no one left to take care of the other -- and good long-term care is always expensive.
- Think about an annuity. An annuity can be structured to kick in when the surviving spouse needs it most, Iqbal says.
A surviving spouse will have to deal with many hardships, but financial pain doesn't have to be one of them.