Ask Carrie by Carrie Schwab-Pomerantz

Dear Carrie: My husband is one of the fortunate ones who have a company-paid retirement benefit. He also receives military retirement. Both of these end upon his death. The probability of this in the next few years is high due to health issues. He has a 401(k), and I'm wondering how much I'll need to support myself once his retirement benefits cease. I am not employed. — A Reader

Dear Reader: As difficult as it is to anticipate the loss of a spouse, you're very wise to consider your own future financial health now. Perhaps you and your husband can look at the economic realities together and come up with the best solution for you. If you haven't been closely involved with your family finances, now is the time to become familiar with the details.

The amount you'll need to support yourself is only part of the question. How much money you'll have access to once your husband's retirement benefits end is probably the first thing to consider. So, start by reviewing all your assets. This would include your husband's 401(k), any other individual or jointly held investment and/or savings accounts, the value of real estate you own and any insurance policies. Make certain you know where these assets are held, in whose name and how they're invested. Be sure that you are listed as the primary beneficiary.

Next, consider how much you'll receive in Social Security benefits. Your husband's military earnings should be covered under Social Security, although it's not a bad idea to double-check. As a widow, if you're at full retirement age (FRA) as defined by the Social Security Administration (age 66 for surviving spouses who were born in 1945-1956), you qualify for 100 percent of your husband's benefits (or your own benefit based on your own work history, whichever is greater). If you're under FRA but at least 60, benefits are reduced, depending on age. Of course, if your husband is collecting Social Security now, you have a pretty good idea of your monthly benefit. If not, you can get this information from your local Social Security office or by contacting the SSA directly online at ssa.gov or calling 1-800-772-1213.

WHAT YOU HAVE VERSUS WHAT YOU NEED

With a clearer idea of what you have, the next step is to create a realistic budget. What are you living on now? Add up your current expenses: housing, food, transportation, health care, insurance, entertainment.

Don't forget to factor in any yearly expenses, such as real estate taxes. Will these expenses change dramatically when you're on your own?

Once you have this information, you're ready to apply some simple math: Subtract your Social Security benefit (or any other regular source of income, such as rent) from your annual spending needs. The result is how much you'll need to withdraw yearly from your invested assets to support yourself.

As I say, that's the simple part. The hard part is determining if your assets are enough to sustain you, which depends a lot on your time horizon. Some industry experts suggest that if you have a 30-year time horizon, you should have a portfolio 25 times the amount you want to withdraw yearly.

Here's an example. Let's say you need $40,000 in annual income and expect to receive $15,000 in Social Security yearly. That leaves a balance of $25,000 that you'd have to withdraw from other assets to meet your annual budget. Multiply $25,000 by 25, and you would need a portfolio of $625,000 to sustain yourself for 30 years. This number would be adjusted if your time frame is shorter, but you get the idea.

GETTING HELP AND SUPPORT

Where you live, how long you think you'll live and how you want to live all play a part in whether these general guidelines are realistic. But by looking at the numbers now, you can plan ahead and make any necessary adjustments. I suggest you talk to a financial adviser who can review how your assets are currently invested and help you project your future earnings and income. Since your husband was in the military, you might also look into survivor benefits. You'll find a lot of information at www.military.com/benefits, including a specific Survivor Benefits Plan that can provide monthly income similar to an annuity.

And one more thing. The economics of living alone are only part of the picture. I hope you're also reaching out to friends and family to plan a life for yourself. You might even consider looking for some sort of part-time work, which could be personally fulfilling as well as help pay the bills. By thinking of these things now, you'll be better able to handle the changes ahead. And your husband may feel better knowing you're prepared.

Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER (tm) is president of the Charles Schwab Foundation and author of "It Pays to Talk." You can e-mail Carrie at askcarrie@schwab.com. This column is no substitute for an individualized recommendation, tax or personalized investment advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

COPYRIGHT 2009 CHARLES SCHWAB & CO. INC. MEMBER SIPC

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