Financial advice for a widow

After 39 years of marriage, Sue Gililland was looking forward to enjoying early retirement with her husband as early as this year. But Don Gililland’s unexpected death last March means she now must make significant changes to provide for herself.

“Had I retired with Don, we could have done nothing and been happy,” said Gililland, who has three children and five grandchildren. “Now it’s hard enough getting through the night.”

Worse, three months after her husband died, Gililland was furloughed from her state job because of the ongoing budget crisis. Missing two Fridays of work every month as an aide to the president of Cal Poly Pomona amounts to a 10% cut in Gililland’s salary, or six years of lost raises. She now makes $58,500 a year.

“She’s taken a couple of big hits,” said financial planner Delia Fernandez of Fernandez Financial Advisory in Los Alamitos. And if she doesn’t act soon, “there will be a couple more coming.”

Gililland’s situation is one Fernandez sees often.

“Men typically die sooner, while women tend to live longer and need more care,” she said.

Nationally, 70% of all married people who lose their spouses are women, and most widows who live below the poverty line were not poor before their husbands died, according to the nonprofit Women’s Institute for Financial Education.

Gililland lives in a three-bedroom home in Covina that may again be worth the $500,000 she and her husband paid for it in 2007 with nothing down. She now owes $484,000 on two mortgages.

Though her home equity is slim, she has a wider margin in a five-unit apartment property the couple bought five years ago in a tiny Northern California outpost called Fort Jones. She owes $35,000 for a property that two local real estate agents told The Times may be worth $250,000 to $400,000.

She and her husband paid for the rental property, as well as renovations on both their residence and the Fort Jones apartments, and paid down other debts with proceeds from the sale of their previous home.

Gililland has $122,000 from her husband’s life insurance, $60,000 in retirement savings and $1,500 in stocks. She has no credit card debt and owns her car outright. Her three adult children are self-supporting.

Benefits denied

Gililland and her husband had planned to fund their early retirement with an expected jump in his disability benefits from the Veterans Affairs Department.

Wounded in Vietnam, Don Gililland had refused to apply for disability benefits for years out of survivor’s guilt, his widow said. But with his health deteriorating, the Purple Heart and Bronze Star recipient applied five years ago and began receiving an amount that grew to $1,500 a month.

As more health problems cropped up, he sought a sizable bump in benefits that would give the couple, along with his other benefits and her Social Security and pension benefits, a total of $7,400 a month.

To reduce expenses, they had planned to sell their Covina home and move into one of the apartments in Fort Jones, a city where one of their daughters lives with her husband and three children.

But when Don Gililland died, the income he provided stopped. In December, the VA denied Sue Gililland’s request for survivor’s benefits. She is appealing and, if successful, could receive a maximum of $1,440 a month for the rest of her life, said lawyer Victoria Collier, author of a self-published book called “47 Secret Veterans’ Benefits for Seniors.”

Fernandez advised Gililland to pursue VA benefits but not count on getting them.

“You’ve had the rug pulled out from under you,” the planner said. “But you need to start thinking like a single person, even though that’s very difficult for anyone who’s been married for a long time.”

To start with, Fernandez urged Gililland to abandon her hopes of retiring this year and plan to work for seven more years, at least.

“The longer you wait, the better off you will be,” Fernandez said.

The good news is that Gililland has a steady job with a pension. If she waits until she’s 66 to retire she should receive $1,828 a month from her state pension, plus $1,455 from Social Security.

To make that income stretch, Fernandez said, Gililland should sell her Covina home, on which her payments are $2,802 a month, including an interest-only payment on the first mortgage with a rate that resets in seven years.

“Even if you could afford these payments, I don’t want you to have a rate adjustment hanging over your head when you retire,” the planner said.

While Gililland works on selling her Covina home in this slow market, Fernandez urged her to find two college students to rent the two spare bedrooms in her home for $700 each.

Reluctant to sell

Fernandez also recommended that Gililland consider selling the Fort Jones property. The expenses exceed her rental income by about $186 a month. Fernandez pointed out that she could make thousands of dollars on that property and invest it in safe securities such as certificates of deposit.

If she were to sell the property, Gililland probably would have $200,000 to $300,000 to buy a condominium or town home near her job in Covina, Fernandez said.

Gililland hesitates to sell the Fort Jones property because she stays in one of the empty units during the 20 days or so that she spends there every year while visiting her family. Her daughter decorated the unit that she and her late husband used to stay in.

“She just made it really warm and homey,” Gililland said, fighting back tears. But the planner urged her to view the property as a business, not an emotional attachment.

Fernandez also urged Gililland to move some of the insurance proceeds into a retirement account and invest it in bonds. Money in a Roth individual retirement account earns interest tax-free and may be withdrawn tax-free in retirement.

Fernandez asked Gililland what she would most like to do after she retires. Gililland, who is part Irish, said she would like to travel to Ireland and Alaska with her children. If she can significantly reduce her expenses, the planner said, she might be able to do so.

Gililland groaned at the thought of postponing her retirement seven years but said she was resigned to it.

“On the one hand, I’m very sad I didn’t retire early to spend that last year with Don,” she said. “But if I had retired, I’d be in a real pickle right now.”

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