According to new LIMRA research, only a quarter of married couples consider the need to provide for one spouse if the other dies a major concern when planning for retirement. Yet LIMRA analysis1 finds that for almost half of 65-year-old couples, one spouse will outlive the other 10 or more years, and in 3 out of 4 couples, one spouse will outlive the other by at least five years (see chart, below).
LIMRA studies over the years consistently show that retirees and pre-retirees rank longevity risks, including protection for the surviving spouse, as a low concern when compared with other types of retirement risks. Yet, according to LIMRA’s research, most pre-retirees do not plan beyond 20 years, making longevity risk one of the biggest strains on a couple’s financial security. Advisors, employers and financial institutions need to take a lead in improving financial literacy, particularly surrounding Social Security benefits, and mitigating both spouses’ longevity risk through other financial products and strategies.
To help address couples’ joint retirement readiness, advisors need to encourage both spouses to be active participants in all financial planning and investment decisions for retirement. This should include a plan to maximize their social security benefits, with a particular eye toward ensuring the surviving spouse receives the highest possible Social Security income, which will increase the likelihood that other assets will last longer in retirement.
A surviving spouse may face financial hardship in many ways: loss of one Social Security paycheck, reduction or elimination of employer-sponsored retiree medical benefits or pension, or increased expenses due to disability and poor health at older age. Careful planning with Social Security, pensions, life insurance, long term care insurance and annuities can help provide couples the financial security and guaranteed income in retirement as long as they both shall live.
1 Retirement Income Reference Book, LIMRA, 2012. LIMRA analysis of the Human Mortality Database, University of California, Berkeley, USA and Max Planck Institute for Demographic Research, Germany.