Suze Orman Tackles a Common Fear: What Happens to Your Finances if Your Spouse Dies First?

 

On a recent segment of The Suze Orman Show, Ilene, 52, voiced a concern many couples face, especially when there's an age gap and one partner is already retired. Her husband, Joseph, 61, has retired and opted for a 50% joint survivorship on his pension. Ilene's goal? "To make sure we plan well for any unexpected life situation and have all our ducks in a row so we can enjoy our retirement to the fullest."

Suze, with her trademark directness, cut to the heart of Ilene's anxiety: "If your husband were to drop dead today, would you be okay?"

Ilene admitted, "That's exactly my worry," grading her current preparedness a B- or C+.

Let's look at their financial picture and Suze's advice.

Ilene & Joseph's Financial Snapshot:

• Ages: Ilene (52), Joseph (61, retired)

• Retirement Savings: $258,381

• Emergency Fund: $114,000

• Other Investments: $37,000

• Home Value: $845,000 (Owned outright, no debt)

• Total Net Worth: Approximately $1,255,808

• Current Combined Take-Home Income (after tax): $10,935/month

• Current Monthly Expenses: $7,952/month

• Current Monthly Savings: $2,582/month

• Remaining Monthly Discretionary Income: ~$400/month

Suze initially gave them a B, a slightly better grade than Ilene gave herself.

The "Sell the House" Fallacy

Suze pointed out a common (and often unhelpful) reassurance from spouses like Joseph: "Sweetheart, you don't have to worry. If something happens to me, you'll sell the house, and that's another almost million dollars, so you'll be just fine."

While financially logical on paper, Suze highlighted the emotional reality:

"When you have lost somebody that you are so in love with, you are paralyzed for a good six months, one year or two years... And the one thing that you don't want to do at that point in time is you don't want to have to sell your home, because that's where you feel comfortable... You don't want your entire life having to change everything at once."

Therefore, Suze assumes Ilene would want to stay in her home for a significant period, if not forever, after such a loss.

Crunching the Numbers: What if Joseph Passes Away?

Suze laid out two scenarios for Ilene if Joseph were to die:

Scenario 1: Ilene Continues to Work (at age 52)

• Estimated Monthly Expenses for Ilene: Drop to ~$4,800 (from $7,900)

• Ilene's Estimated After-Tax Monthly Income: ~$7,500 (This includes her working income and 50% of Joseph's pension. At 52, she can't access her SEP IRA without penalty and wouldn't want to take widow's benefits yet).

• Outcome: Ilene would be okay financially.

Scenario 2: Ilene is UNABLE to Continue Working (e.g., due to an accident, illness)

• Estimated Monthly Expenses for Ilene: Still ~$4,800

• Ilene's Estimated After-Tax Monthly Income: Drops to ~$4,607 (This is only 50% of Joseph's pension, as she has no work income).

• Outcome: Ilene would be short each month, just barely making it or falling behind. This is the scenario that causes real financial stress.

Suze's "Way to an A": The Simple Solution

To address the shortfall in the critical second scenario and give Ilene true peace of mind, Suze offered a straightforward solution:

A 10-Year Level Term Life Insurance Policy on Joseph.

• Coverage Amount: $1 million (or even $2 million).

• Term: 10 years (meaning the premium stays the same for 10 years, and then the policy typically ends or becomes much more expensive).

• Purpose: If Joseph passes away within these 10 years, Ilene receives a lump sum of money. This sum would effectively replace the lost portion of his pension income, ensuring she's more than fine financially, even if she cannot work.

• Estimated Cost: Approximately $272/month for a $1 million policy.

• Affordability: With their current $400/month discretionary income, this is easily affordable.