Losing a partner can have a devastating emotional impact. The last thing you’d want is for your financial security to suffer as well.
Sunday, 8 March marks International Women’s Day, when people all over the world celebrate the vital contributions women have made to society. But even today, women are still fighting for equality in many aspects of life. Financial security is one of them.
On average, women in Australia earn 14% less than men(1) They’re also more likely to take time out of the workforce to care for children or elderly parents, which reduces their earning potential even further.
What’s more, women live longer: the current average life expectancy for Australian women is 84.9 years, compared to 80.7 years for men(2). And because women tend to earn less during their working years, they have less super to retire on.
While having a long life expectancy is great, it also means that married or partnered women are more likely to face widowhood than their male counterparts. Although it’s not something anyone likes to think about, it’s important to consider how you’d cope financially – both during your working life and in retirement – if you had to go it alone.
Fortunately, there are steps you can take now to financially prepare yourself in case you outlive your partner. Or, if you’re already widowed, there are ways to make your finances stretch as far as possible.
If you want to be prepared…
1 Create an estate plan
First of all, make sure you and your partner both have up-to-date wills. If you’re business owners, set up a formal succession plan that outlines what you want to happen to the business if either of you passes away.
You should also know how to access each other’s bank accounts, super and insurance. So make sure you leave written instructions somewhere safe where you and your partner can both find them.
Another thing to be aware of is that your super doesn’t automatically form part of your estate. This means your super fund can decide who gets your retirement savings after you die, unless you set up a binding death benefit nomination
specifying who the money should go to.
Talk to your financial adviser if you need to set up or change a binding death benefit nomination for you or your partner.
2 Check your life insurance
Another way to protect your finances is to make sure you and your partner both have adequate life cover. This insurance provides a lump sum payment if either of you die, which can be especially helpful if you have debts to pay off. It can also ease the pressure of keeping up with your ongoing expenses when you’re on a single income.
You can take out life insurance either through your super fund or outside super. Getting insured through your super means your premiums are paid directly from your super account, so you don’t have to cover the costs from your bank balance. But this means you could end up with less money to retire on, so ask your adviser which option is best for you.
3 Use smart money strategies
If you’re used to having two incomes, or your partner is the primary earner, becoming widowed can make you financially vulnerable. That’s why it’s so important to get your finances into good shape now.
For starters, make sure you clearly understand all of your household earnings and expenses. If you have unsecured debts like credit cards or personal loans, make it a priority to clear them.
Once that’s done, consider making additional mortgage repayments or putting a bit extra into your super. Even small amounts can make a big difference over the long term.
If you’re already widowed…
1 Know your entitlements
The federal government offers different types of financial assistance, depending on your specific circumstances.
However, from March 2020, some important changes will be made to the following assistance schemes:
– Newstart Allowance – This scheme for working-age people will be replaced on 20 March 2020 by the Jobseeker Payment. Many features will stay the same, although it will also be open to people who have stopped working due to
illness or injury.
– Bereavement Allowance – This provides short-term financial assistance if you’ve become widowed within the last 14 weeks and you’re not receiving another income support payment. From 20 March 2020, this assistance will be
provided under the new Jobseeker Payment scheme.
– Widow Allowance – This payment used to be available to widows born before 1 July 1955, although the government hasn’t accepted new claims since 1 July 2018. If you’re already receiving the Widow Allowance, you can still claim it until 1 January 2022 subject to the income and assets test and other eligibility rules. After that time, you’ll be automatically transferred to the Age Pension.
2 Stretch your money further
If you’re recently widowed and worried about money, there are things you can do to give yourself peace of mind. As a starting point, draw up a household budget and go through all your expenses to see if you can make any savings without sacrificing your lifestyle.
If you own your own home, downsizing might be an answer. By selling your property and buying something smaller, you could end up with a tidy sum that you can invest or live on. You might also find that life in a smaller home reduces your bills and maintenance costs.
And if you’re retired, you may also want to explore financial products like annuities, which can provide a guaranteed income stream throughout your retirement. Another option is a reverse mortgage, which allows you to borrow money against the equity in your home.
Get the right advice
Your financial adviser is there to help you, especially in times of change and uncertainty. They can help you structure and manage your finances, and access the right government support and financial products so you can make the most of
your money – and the next phase of your life.
(1) Workplace Gender Equality Agency, Australia’s gender pay gap statistics, August 2019.
(2) Australian Bureau of Statistics, Life tables, states, territories and Australia, October 2019.