Alliance America Logo Contact About Us Articles Home
A woman holding a map in a city.

How to cope financially if you become suddenly single

by Susan Wright | Contributor
December 22, 2022


As time goes on, we experience many changes in life. Some of these may be happy - like marriage, retirement or the birth of a new grandchild - and some may be sad, such as losing a spouse to death or divorce.

Because we never know what to expect, it's important to plan for a variety of potential situations. That way, your assets and income can remain intact for their originally intended purposes, instead of being liquidated (oftentimes at a steep discount) to pay for your needs going forward. With a good plan in place, you may also be able to maintain a similar lifestyle - and not dig into funds that were earmarked for other things.

One of the biggest jolts to your current and future financial security is the loss of a spouse. Regardless of whether this loss is due to death or divorce, becoming “suddenly single” can require a long list of adjustments to your finances - and to your life. Because of that, the sooner you put safeguards in place for this possibility, the better you will be able to fare down the road.

How becoming “suddenly single” impacts men vs. women

Nearly everyone at some point manages their money solo. This could be due to divorce or the death of a spouse or partner, or because they were never married. In any case, doing so can differ dramatically from managing your money as a couple.

According to the United States Census Bureau, there are nearly 127 million unmarried and unacknowledged people in the U.S. (as of late 2022). That figure represents nearly 50% of the country's total adult population.

Over the past several decades, the number of married men and women has decreased, while at the same time, the percentage of those who have never been married - both males and females - has increased.

Women's Marital Status in the United States

A graph depicting women's marital status in the United States between the years 1950 - 2021

Source: United States Census Bureau

Men's Marital Status in the United States

A graph depicting men's marital status in the United States between the years 1950 - 2021

Source: United States Census Bureau

Given this trend, those who are single, widowed or divorced are quickly becoming the majority in the United States. For those who have been married in the past, though, divorce or widowhood can mean having to master some new financial skills in order to get by.

These “new” skills can differ between males and females - primarily because going from two to one can impact each gender differently from a financial perspective. For instance, while older widows and widowers may be worried about how to pay for ongoing living expenses following the loss of a spouse, most women - more so than men - are concerned about how they will afford care that they may require in the future.

Likewise, according to a study that was published by the U.S. Government Accountability Office, the household income of women falls by an average of 41% after a divorce, while men's household income falls by just 23%.

Similarly, women who are still raising children following a divorce or the death of a spouse can face further financial challenges by trying to maintain the family home while at the same time experiencing a reduction in incoming cash flow.

If financial struggles are faced before retirement, it could mean that there was no - or very little - money set aside for the future. And this can mean that financial hardships will continue into the future. Therefore, having a financial strategy in place that can replace lost income and assets is vital.

Knowing what to anticipate if you must go solo

Whether you are newly widowed, divorced or facing the future on your own after a relationship that just didn't work out, being single might seem like it is full of financial challenges - and it is.

So, just like most other types of “emergency” plans, you should be familiar with the steps you would need to take if you lose your spouse or significant other. These can include the following:

  • Locating and reviewing important documents
  • Updating financial accounts and insurance coverage
  • Ensuring that all of your beneficiaries are up to date
  • Continuing to pay bills on time
  • Getting and/or putting financial accounts in your name
  • Filing claims for life insurance benefits (if applicable)
  • Reassessing your retirement savings and/or income generation strategy

If you have recently become single - or you anticipate that you will become single in the near future - another important task that you should tackle is creating an updated budget that is based on your new income and expense projections.

In this case, while some of your expenses may decrease - like food and utilities - your income might also be reduced. For instance, if you and your former spouse or partner both generated incomes, you will have to make some adjustments so that you can move forward with only your portion.

The same holds true if you are retired. For example, upon the death of a spouse, it is possible that your income going forward would be significantly reduced from one or more sources like:

Lost or reduced pension income benefits

When a participant who is receiving income from a traditional defined benefit pension plan dies, the income that he or she would have been entitled to are oftentimes paid to their named beneficiary either via a lump sum distribution or in installments from an annuity. But this is not necessarily always the case.

Typically, the Employee Retirement Income Security Act of 1974 (ERISA) protects the surviving spouse of deceased participants who have earned a vested pension benefit before their passing. However, the nature and extent of this protection is dependent on the type of pension plan and weather the participant dies before or after the pension income is scheduled to start.

According to the IRS, the pension plan will typically notify a surviving spouse with regard to the following factors:

  • The amount and the payment method of the future benefits
  • Whether death benefits from the plan may be “rolled over” into another retirement plan, and
  • If a rollover is possible, the allowable method and time period in which it must be completed

In the case of a divorce, the value of the pension account is usually divided into a “pre-marital” portion - which represents the funds that were accumulated in the account prior to marriage (if any) - and a “marital” portion, which is the amount of funds that were accumulated in the account during the time the participant was married.

The marital portion of the pension plan account will then be treated as marital property and as such, it is divided - along with other marital assets - between the two spouses at the time of their divorce.

Reduced income from Social Security

If you are retired and you and/or your spouse are receiving retirement benefits from Social Security, death or divorce could have an impact on these, too. For instance, if both spouses are receiving retirement income from Social Security, and one of them passes away, the survivor will only be able to keep the higher amount - but they will lose the lower benefit.

As an example, John and Lynda were retired. John receives $2,000 in Social Security income, while Lynda receives 50%, or $1,000 per month as a spousal benefit. This gives the couple a total of $3,000 per month in household income from Social Security.

If Lynda passes away, John can keep his $2,000 per month benefit, but he will lose the $1,000 per month from Lynda's benefit. Conversely, if John passes away first, Lynda can continue to receive the higher benefit of $2,000 per month, but the lower $1,000 monthly benefit will go away. In either case, the household income will drop to just $2,000 - or a decrease of 33%.

Getting divorced can also impact the amount of Social Security income that an individual has access to. While some exes are eligible to receive Social Security, based on their former spouse's work record, this is not the case for everyone.

Putting financial protection in place and adjusting your plan

Although no one likes to dwell on the unthinkable, losing a spouse or significant other can have a big impact on the survivor's income, and ultimately on their life. So, it is critical to understand what is available in terms of financial resources.

Depending on your specific situation, divorced or surviving spouses could qualify for one or more of the following to help with easing future financial strain:

  • Social Security survivor's/widow's benefits
  • Social Security divorced spouses' benefits
  • Life insurance as income replacement
  • Annuity income options

Social Security survivor's/widow's benefits

A woman looking happy while looking at her laptop and holding a credit card.

Social Security survivor's benefits are paid to widows or widowers and dependents of qualified workers. While these benefits can be particularly important for young families with children, they can also help those who are retired.

If a couple was married for at least nine months or more, and the deceased spouse had worked long enough that at their retirement they would receive their own Social Security (even if they had not yet started to receive these benefits), then the survivor will be eligible for a widow's or widower's benefit.

Social Security also provides widow's/widower's benefits for ex-spouses. In this case, if you were married to your ex-spouse for at least 10 years, and you did not remarry before you reached age 60, then you could be able to collect a Social Security widow's/widower's benefit based on your deceased ex-spouse's work record. (This is the case, even if your ex-spouse had remarried before their death.)

Social Security divorced spouse's benefits

Many people are unaware that they may be able to collect Social Security divorced spouse's benefits. So, even though you are no longer married to your ex, you may be eligible for Social Security benefits based on his or her work record if you are now divorced.

In order to qualify, though, there are several criteria that you need to meet, including:

  • Your marriage lasted for at least 10 years
  • You are currently unmarried
  • You are age 62 or older
  • Your ex-spouse is entitled to Social Security retirement or disability benefits (although he or she does not have to actually be receiving these benefits yet), and
  • The Social Security income benefit that you are entitled to receive (based on your own work record) is less than the benefit you would receive based on your ex-spouse's work

It is important to note that if you remarry, you generally will not be allowed to collect Social Security divorced spouse's benefits based on your former spouse's record - unless your later remarriage also ends, either by death, divorce or annulment.

In addition, if your ex-spouse has not yet applied for retirement benefits through Social Security, but he or she can qualify for them, you can receive benefits on their record if you have been divorced for at least two years.

As a divorced spouse of an eligible Social Security recipient, you could receive benefits that are the same as a widow or widower, provided that your marriage lasted for at least 10 years. The benefits that are paid by Social Security to a surviving divorced spouse will not affect the benefit amount for other survivors who are also receiving benefits on the worker's record.

Likewise, if a surviving divorced spouse remarries after he or she has reached age 60 - or age 50, if they have certain types of disabilities - the remarriage will not have an impact on their eligibility for survivor's benefits from Social Security.

Knowing what you are eligible for through Social Security if you suddenly become single is a big step toward gaining a stronger financial footing in terms of paying your current and future living expenses.

Life insurance as income replacement

Another way to plan for becoming suddenly single - in this case, due to the death of a spouse or significant other - is with life insurance. This is the case both before and after you retire. Life insurance proceeds can help with covering the cost of a funeral and burial, as well as paying off various debts (such as a home mortgage, vehicle loans and credit card balances). It can also be used for replacing lost income.

If you suddenly become widowed - and your deceased spouse had contributed to the household income - you may face some financial hardships without a strategy for replacing this cash flow.

There are many different “rules of thumb” for determining how much life insurance an individual should have. For instance, while some say that the death benefit should be based on a multiple of the insured's annual salary, others believe that additional factors should be considered.

Because there are many differences of opinion here, it is recommended that you work with a life insurance specialist before committing to any type of policy or plan. That way, you can more easily “customize” a strategy that fits in with your specific goals and needs.

There are also some who believe that life insurance coverage is no longer needed after an individual has retired. But this is not necessarily true. For example, if one spouse is the recipient of a pension plan, along with income from Social Security, these cash flows could be reduced significantly upon their death - in turn, leaving the survivor with far less income in the future to pay for housing, food and other necessary expenses.

If the deceased spouse was covered by a life insurance policy, though, the death benefit that is paid out to the surviving spouse could be converted to an income stream, essentially “replacing” the cash flow that was lost.

Annuity income options

Properly structured annuities can also be used for ensuring that you have an income stream if you become suddenly single - and that income could even last for the remainder of your life, no matter how long that may be.

Annuities are designed for paying out income for either a set period of time, such as 10 or 20 years, or for life. Having one or more annuities in place can ease concerns about running out of money - provided that they are properly set up.

For instance, many annuities offer a joint and survivor income option. Couples often opt for this because it continues to make income payments - even after the first spouse (or other income recipient) dies.

Other items to be mindful of - just in case

When planning ahead financially - keeping in mind the potential to become suddenly single - there are some other items to be mindful of, too. These include:

  • Payment for future long-term care needs
  • Estate/asset transfer issues

Payment for future long-term care needs

When a married or partnered individual needs long-term care, it is oftentimes their spouse or significant other who takes on a caregiving role. But for single individuals, there is often no one to rely on for this.

Therefore, many singles must instead rely on paid care providers. But this type of care can be expensive. Based on the 2022 Genworth Cost of Care Survey, the median monthly cost of just one month in a semi-private room in a skilled nursing facility (in 2021) was nearly $8,000. A private room, on average, can run more than $9,000 per month.

Monthly Median Cost of Care in the U.S. (in 2021)

In-home care Community and assisted living Nursing home facility
In-home careHomemaker services: $4,957 Community and assisted livingAdult day health care: $1,690 Nursing home facilitySemi-private room: $7,908
In-home careHome health aide: $5,148 Community and assisted livingAssisted living facility: $4,500 Nursing home facilityPrivate room: $9,034

Source: Genworth Cost of Care Survey 2022

Unfortunately, many people find out too late that Medicare pays very little - if anything - for long-term care services. So, without some type of long-term care coverage in place, you can run the risk of depleting your assets while you still need them.

Estate/asset transfer issues

As a newly single individual, you may no longer have someone else to rely on for some - or all - of your financial support and retirement income. In addition, when planning ahead for asset transfer situations, single individuals can run into some significant tax-related issues if these are not planned for.

For instance, unlike married couples - where one spouse can transfer an unlimited amount of assets tax-free to their surviving spouse - those who are single do not have this luxury. Therefore, when transferring assets and/or property, Uncle Sam could end up being the recipient of a large percentage of these.

Based on the situation, there are various tax-reduction strategies that could be used. These may include setting up trusts and/or properly structured life insurance coverage to lessen the impact of the potentially hefty taxes.

Do you have all of your bases covered if you become suddenly single?

If you have lost a spouse or significant other - especially if you have spent many years together - it can be devastating. Because grief can often be all-consuming, it is important that you not make any major decisions or changes in your life, at least until some time has passed.

This is one of the key reasons why already having a plan in place for replacing lost income and assets is essential. That way, you can continue to pay your ongoing living expenses as you heal from the heartbreak.

Alliance America can help

Alliance America is an insurance and financial services company dedicated to the art of personal financial planning. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.

A mother reading a book with her daughter

Your legacy is vastly more than an amount of money left to your surviving beneficiaries. Part your legacy can be the example of a life well-lived that’s achieved through proper planning.

A senior couple stressed over tax liabilities

Too many people enter retirement with burdensome mortgages, car payments and credit-card debt that they’ve amassed during their working years. Proper management of these liabilities is fundamental to your current and future financial viability.

A daughter hugging her mother

Financial planning often is motivated by our love for our life partners, children, family members and friends.

Using a calculator to calculate taxes

Taxes have a significant impact your finances and can siphon assets unless you have a prudent approach to meet your objectives.