Delores Davis, age 81, will have been widowed for 15 years come August. Her husband passed away when they were both retired, and while she still gets some of his retirement funds, that income dropped after his death. Meanwhile, she gets very little from her own work.
“While we were married I only worked part time, he was the full-time breadwinner,” she said. “If I had worked full time then it would have been better for me.”
She gets a very small Social Security check that she thinks is about the minimum one can receive. So she lives on a tight budget. “I have watched my pennies,” she explained.
Davis can’t afford to go on vacations or trips like her friends. She recently had to buy a new car when her old one stopped working, throwing a wrench into her budgeting. Last year her Social Security check increased by $25 a month, but she said that given that her Medicare costs went up at the same time, she only saw an extra $15.
“I just had to be aware of how I’m spending,” she said. Prices keep rising as she lives on a fixed income. “You go to the grocery store and buy a loaf of bread or milk and they charge you the same price as they charge everyone else.”
Elderly women have a lot more to contend with than men. They make less throughout their careers thanks to the persistent gender wage gap, meaning they have less to put away for retirement. They are more likely to take time off of a career or go part-time to care for children, and that will mean lower payments into Social Security that will lower the amount they receive in retirement. They live longer than men, so they’ll need that money to stretch further. And for today’s widow, simply managing the finances can be a challenging task.
Many elderly widows alive today come from a generation where husbands took care of financial matters. In a recent survey from the Women’s Institute for a Secure Retirement (WISER) of 246 women over the age of 70 who had been widowed in the past five years, a third said their husbands were primarily responsible for the finances. Just three in ten were the ones who usually dealt with them. This meant that nearly one in five were very concerned about being able to make financial decisions when their husbands died.
This leaves them struggling to stay on top of matters when they end up alone. About a quarter had trouble finding important documents and the same share struggled to find out what they were owed from IRAs. About a quarter found it hard to make mortgage payments.
“Women will pay the bills, but they’re not really involved in the finances, they may not know where the 401(k) money is or other pieces of the retirement income they’re going to be relying on,” Cindy Hounsell, president of WISER, said. “When you ask women, ‘Are you involved with finances?’ they say yes, if you ask them, ‘Where’s the retirement money invested?’ they wouldn’t know the answer.”
Joan Entmacher, vice president for family economic security at the National Women’s Law Center, agreed. “It’s not uncommon in traditional marriages for women to get a household allowance and manage a lot of the bills,” she said. But “the real decision-making authority over big decisions was the husband and they wouldn’t have made investment decisions.”
Some of this stems from traditional gender roles, since men in an older generation overwhelmingly saw themselves as the breadwinners while women were the homemakers. But it can also just make some day-to-day sense. “A lot of times women are doing so many things that they are just so grateful if somebody else will do the other piece of it,” Hounsell said. If women have to work part time (or even full time), care for the children, and clean house, they may just be happy not to take on the extra task of tracking investments.
And if women didn’t work at all, that may have been why they were kept out of the finances. “It’s certainly likely that a lot of women who weren’t earning their own money had less responsibility for handling it,” Entmacher said.
This is how Eileen Battisti lost her home over $6.30. That was the interest she owed on school district taxes, but she told the court that she “struggled to assume responsibility for the financial matters previously handled by her husband” after he died, and didn’t know she owed that amount. By the time her house was sold, the debt had ballooned to $255. There are other stories of elderly women losing their homes for owing small amounts: an 81-year-old homeowner in Rhode Island who was evicted from the home she owned for more than 40 years over a $474 sewer bill; an elderly woman in New Jersey whose tax debt has reached $80,000 while she fights foreclosure proceedings.
We tend to lose financial literacy as we age anyway, compounding this problem. And, for widows, making financial decisions can be particularly fraught during the trauma of losing a partner.
“Financial literacy of both sexes is not particularly high,” Helaine Olen, author of Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, said. “When we age our financial smarts actually peak in our fifties.” She said there are plenty of cases where some elderly people don’t even know how to use ATM machines and other basic instruments.
Elderly women may struggle in particular. In a survey of people age 50 or older on a set of three financial literacy questions, women are much less likely to correctly answer them. They are also far more likely to answer “do not know,” likely indicating a sense of insecurity around fiscal issues. “This might be a reflection that it’s not just that they don’t know, but they are not confident,” said Annamaria Lusardi, an economics professor at the George Washington University School of Business and the survey’s author. She noted that there is other research evidence that after women are widowed or leading up to that time, they become more financially savvy under the tough circumstances. But she noted women “have to be even wiser, more sophisticated in handling finances because they have less and it’s more complex to arrange for money to last longer.”
Then losing a spouse means a variety of pressing financial concerns at a time of emotional distress. Davis counts herself lucky in this regard. After she and her husband attended a number of funerals and heard from friends that they had already made burial plans for each other, they made plans of their own. “When my husband died, all I had to do was call the mortuary, everything was paid for,” she said. “That’s the only thing that saved me.” Otherwise, she said, the high cost of a funeral would have been too much for the little savings they had put away. “I wouldn’t have been able to do it.”
Many people haven’t been so smart about planning ahead, however. “Widowhood is a confusing time and brings with it a lot of new financial responsibilities,” Entmacher said. “There are a lot of things you have to pay for, a lot of things to cancel, a lot of life changes that are difficult to manage at a time when you’re under a lot of stress.” Financial acumen may not save a new widow from bad choices.
“Even women who were financially savvy are at risk of making the wrong decisions because you’re psychologically vulnerable at that time,” Sara Rix, a senior strategic policy adviser at the AARP Public Policy Institute, said. “With most financial decisions, it’s best to put any big ones off until you’re in a more stable frame of mind.”
And the loss of a spouse nearly always coincides with a loss of income. Many couples may not realize that while they get two Social Security checks while both are alive, whoever survives the other won’t be able to keep both. “You get whichever benefit was larger,” Hounsell explained. If a woman made less than her husband over her lifetime and is only getting about half of his amount – say he’s getting $1,000 a month, while she gets $500 – going down to $1,000 after he passes away is still losing a third of the household’s income. “That’s a big chunk of money, it’s like getting a third less of your paycheck,” she added. The WISER survey found that about 50 percent of widows lose at least half of the household income when their husbands die.
These problems, coupled with their lower lifetime earnings and savings, are likely contributing to the fact that so many elderly women end up living in poverty. “We’re finding rising levels of poverty among all seniors, but they’re particularly hitting women and women of color,” Kevin Prindiville, executive director of the National Senior Citizens Law Center, said. There was a particularly large spike in the number of women over 65 who are living in extreme poverty last year, with the rate jumping by 18 percent after holding steady for most of the previous decade.
The loss of income coupled with the loss of a spouse can leave women vulnerable to a number of problems. More and more elderly Americans are carrying debt into old age. Mortgage debt has grown particularly fast, with the median amount owed jumping from $43,400 in 2001 to $79,000 in 2011. But they may end up having to make choices between what bills get paid.
“Are you going to pay the debt collector barking at your door,” asked Odette Williamson, a staff attorney at the National Consumer Law Center, or “the tax collector who is sending you notices but is less aggressive?”
That may be how some people end up getting ensnared in the tax lien foreclosure process and losing their homes over a small debt. “If you’re struggling and just barely getting by, you have to prioritize what you’re paying,” she added. Meanwhile, she pointed out that older Americans on a fixed income may have fewer financial reserves to get out of the foreclosure process if it begins.
And they can expose themselves to illegitimate collectors as well. The elderly are particularly prone to getting ensnared in financial scams. One in five people age 65 or older has experienced financial abuse, according to a 2010 survey. In 2012, people over the age of 60 made up more than a quarter of all fraud complaints to the Federal Trade Commission, the highest of any age group.
Widows may end up being even more susceptible. About 40 percent of the widows surveyed by WISER were concerned about avoiding fraud and scams. “The victims of scams are often women living alone,” Entmacher said. “A lot of scammers who prey on people’s loneliness will call, will talk, will lend a sympathetic ear.” The lack of financial resources can compound the loneliness.
What can be done to protect women as they reach older age? Olen called on children to step in and help their mothers navigate the complexities. “Most married couples at that time had children,” she pointed out. “Where are their kids and why are they not taking over?” That may be what many widows are expecting: their children will step in when their husbands are no longer around.
But not everyone will have children or live close enough to them to get the support they need. Davis has two children but one of them lives on the opposite coast – she’s on the West, while her son is on the East – and her daughter lives about 60 miles away. Meanwhile, between them she has five grandchildren, three of whom have graduated high school, so her children are paying for their college educations. “They have their own children and they have nothing extra,” she said.
Ensuring that all women remain financially secure into their old age will require a strong enough safety net to catch them. “The biggest policy prescription is to reject proposals to cut the safety net further,” Prindiville said. It may also take proactive steps to shore it up. He suggested updating the asset limit to qualify for Supplemental Security Income program, which hasn’t gotten a real overhaul since it was signed into law in 1972. Currently, an elderly person with more than $2,000 in assets can’t qualify. Medicare and Medicaid need to be easy to qualify for and access, which would also take some updating. Social Security could be expanded. And for elderly women in particular, the Center for American Progress has proposed Social Security credits for time taken out of the workforce to care for family members, which many women end up needing to do, which would increase the amount they saw later in life.
These financial cushions could do a lot to protect a widow from financial fraud. It’s the lack of resources that makes them want to, say, believe a scammer’s promises. WISER’s Hounsell recounted many of the stories of victims who are widows who ended up with less money to leave their children than they had wanted. “They feel badly they have nothing to leave them, then someone calls up and says, ‘You just won!’” she said. All they need to do to claim the winnings is hand over their Social Security numbers and bank account information. “They all say the same thing – that’s why they fall for it.”