Widowed spouses face retirement challenges.

• Position: Your Life - Brief Article

Widowed spouses, particularly from middle-income couples, face retirement spending challenges not encountered by single retirees, and couples need to develop a sustainable spending plan for the survivor, suggests New York financial consultant Gordon B. Pye, a member of the Financial Planning Association, Denver, Colo. "Couples want to sustain their standard of living in retirement, not only while both members are alive, but when one becomes the sole survivor," he points out. The challenge is that, when one spouse dies, the other almost invariably faces a reduction in income, sometimes a substantial one. Yet, expenses for the survivor may decline very little.

The loss of Social Security benefits is the most common problem. Take a couple, each of whom receives $15,000 a year in Social Security benefits, or $30,000 a year combined. Because Social Security rules entitle the survivor to receive only the largest individual benefit of either of them, his or her benefits would drop to $15,000 a year, and most likely force a reduced lifestyle. A couple in which only one has a work history might receive $22,500 --$15,000 for the worker, and $7,500 for the nonworker. When one dies, the survivor will receive $15,000, a $7,500 decline. "In general," Pye indicates, "the survivor of a married couple will always have his or her Social Security benefit...