It’s not easy to talk about, but it may be one of the most important conversations you’ll have in retirement: What happens to our income when one of us is gone?
At Troyer Retirement, we work with clients to prepare for the loss of a spouse and the income burdens it can create.
Why Income Can Drop Faster Than Expenses
When one spouse passes, several things can happen at once:
- Social Security shrinks. The surviving spouse generally keeps the larger of the two benefits, and the smaller one goes away. The household loses one check.
- Pension income may drop. Depending on the payout option chosen at retirement, a pension may reduce or end.
- Taxes can rise. Filing status typically changes to single after the year of the spouse’s death, which means narrower tax brackets. The same income can create a bigger tax bill. This is sometimes called the “widow’s penalty,” though it affects widowers too.
- Medicare premiums may increase. Income thresholds for higher premiums are lower for single filers.
- Many bills stay the same. The mortgage, utilities, insurance, and property taxes don’t cut themselves in half.
5 Things to Consider
1. Coordinate your Social Security strategy. The higher earner’s claiming age can set the survivor benefit for the surviving spouse. Our post, When Should You Claim Social Security in Indiana, Ohio or Michigan?, covers the basics. Our Social Security Optimization service looks at both spouses together.
2. Revisit pension survivor options. If you’re choosing a payout, understand what each option means for the surviving spouse.
3. Review sources of guaranteed income. Income that continues for life may ease pressure on a surviving spouse.
4. Look at taxes for both of you. Strategies like Roth conversions may affect the future tax burden on a surviving spouse.
5. Get organized. Keep an updated list of accounts, beneficiaries, insurance policies, and important contacts, and make sure your spouse knows where everything is and who to call. Review beneficiaries regularly.
Looking Beyond the Two of You
Planning for a spouse is part of a broader Family Legacy Planning conversation. For ideas on tax-efficient strategies for heirs, see Preserving wealth for future generations (and not the IRS).
Surviving Spouse Planning FAQs
Does a surviving spouse get both Social Security checks?
No. A surviving spouse generally receives the higher of the two benefits, not both. Rules depend on age and other factors, so confirm details with the Social Security Administration.
At what age can a surviving spouse claim survivor benefits?
As early as age 60 (reduced), or full survivor benefits at survivor full retirement age. Different rules apply for disabled survivors.
Can a surviving spouse still file taxes jointly?
Generally, yes, for the year of the spouse’s death. After that, filing status typically changes unless special circumstances apply.
When should we start planning for this?
Many people start before retirement, or at minimum before claiming Social Security or choosing pension options, since many of those choices are hard to reverse.
How often should we review our plan?
At least annually and after any major life event.
Want to talk it through together? Schedule a meeting with our team, or learn about our firm.
This content is provided for informational purposes only. Troyer Retirement and its representatives do not provide tax or legal advice. Individuals should consult with a qualified professional regarding their personal situation before making financial decisions.
Investment advisory products and services made available through Impact Partnership Wealth, LLC (“IPW”), a Registered Investment Adviser. Troyer Retirement is not affiliated with or endorsed by the U.S. Government or any governmental agency. Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA. 6053356-10/26
