by Archie M. Richards, Jr., CFP^®
March 11, 2002

In Bottom Line Personal, Alexandra Armstrong, CFP^®, who was herself widowed, gives the following advice to those who have lost a loved one:

• You're likely to need 30 copies of the death certificate. The funeral director can help to obtain them.

• Contact your spouse's employer concerning unpaid bonuses, commissions, deferred compensation, pension distributions, group life insurance, unused vacation, and unused sick days.

• Inform your life insurance agent about the death. Ask the credit card companies whether the debit balances are covered by insurance. Speak with the benefits directors of professional organizations or unions about possible insurance or retirement benefits. Find out whether the auto loan or the mortgage has a payment protection plan.

• Contact the Social Security Administration (800-772-1213 or www.ssa.gov) concerning your eligibility for spousal benefits.

• Pay off your high-interest loans, such as credit cards, auto loans, and education loans. (I suggest also paying off any brokerage account margin loans; borrowing against stocks to buy additional stocks is too risky.)

• Ask the bank or mortgage company, if necessary, whether it would be willing to freeze your mortgage payments for a few months.

• If the rate on your home mortgage is high, refinance to a lower rate. But preserve the interest deduction in your tax return and don't pay off the mortgage. Instead, invest your cash in a long-term investment program.

• The life insurance company will probably suggest that your insurance benefit not be paid in a lump sum. It will recommend that the benefit be paid out in increments for the rest of your life. (The technical term is "annuitize.") For a person who's grieving, income that continues for life seems appealing. But do not decide quickly. The decision to annuitize cannot be reversed. While you're making up your mind, leave the money with the insurance company to earn interest. If a family member asks you for money, you can say, sorry, you don't have it.

• Do not make any important decision quickly. Wait at least a year, for example, before selling your home and moving. Instead, rent a place where you think you might want to move and see how you like it. If you move to where your son lives, for example, you may miss your friends. Relying on your son for companionship may strain your relationship with him.

• If you receive a large amount of cash, resist the temptation to splurge. Taking your family on an expensive vacation, for example, would make you feel you're in control. But you might realize later that it broke your budget.

• Do not make loans to people who have been helpful during your time of loss.

• Take a leave of absence, if need be, but keep your job.

• Do not hand over control of your finances to members of your family. Even when they're well meaning, their advice may not suit your needs. Retain control.

• While you're under stress, do not rely on your memory. Record names and dates and keep notes about the details of conversations.

• If you need a financial planner, the Financial Planning Association is a good place to start. Call 800-282-7526 or see www.fpanet.org.

I would add that without emotional health, you're less likely to enjoy financial health. Take time to grieve. If therapy would help, by all means obtain it.

Pay no attention to the latest investment rage. From 1984 through 2000, the S&P 500 achieved average annual returns of 16.3 percent. But Dalbar, a company that does research for financial service firms, found that the average stock mutual fund investor during the period ended up with yearly returns of only 5.3 percent.

Why? Because too many investors bought funds after they'd gone up and become popular. And too many sold funds after they'd gone down and fallen out of favor.

I have a better idea. Don't try to outguess the market. Don't even try to buy low and sell high. Instead, just acquire broad-based index funds that own thousands of domestic and foreign stocks and keep on holding.

It's less work and a lot more profitable.