Common Financial Issues for Surviving Spouses

common financial issue for surviving spouses

Surviving spouses have a lot to deal with when their significant other passes away. There is much emotional grief. Many financial and life issues arise, requiring their attention. All of this can be even more burdensome in times when economic uncertainty is strong.   

For many people in retirement, this situation applies now. The cost of living is going up. Healthcare costs are often an ever-growing area of spending for many retirees, as their need for healthcare usually increases in later years. What’s more, surviving spouses are often left in a harder situation, as their expenses may not go down proportionately with their incomes.

Here we will look at some of the issues that surviving spouses can expect to face after their spouse is gone.

Change in Social Security Benefits

One big change that surviving spouses experience is that they are no longer privy to their spouse’s Social Security benefits. Whereas they once had two Social Security payments each month, now there is only their own benefit, or else the survivor’s benefit.

That means that they must pay their monthly bills with their reduced income. Many expenses will remain after the death of one spouse, such as the rent or mortgage payment, utilities, transportation and insurance, and other assorted expenses.

This change is more extensive when the primary income earner dies first, meaning that the larger of the two benefits will disappear. It’s good to prepare for this scenario beforehand by socking away money in savings and taking other measures to ensure that the surviving spouse will be able to pay all their expenses.

One thing that should be done immediately is to have the funeral director notify the Social Security Administration of the spouse’s death. This way, there will be no problems with receiving further benefits on behalf of the deceased.

Another important factor to consider is whether the survivor’s benefit for Social Security is larger than the full benefit that will be paid to the survivor based on their own earnings history. If the survivor is supporting minor children, then they need to make an appointment with their local Social Security office right away to get survivor’s benefits.

Why? Because the benefit clock starts from the day of application and not the date of death. Survivors should also apply immediately if they are caring for their deceased’s children under the age of 16. If neither of these conditions applies, then they can apply for survivor’s benefits at age 60 (or 50 if they are disabled).

Finally, say that the survivor benefit is expected to be larger than the surviving spouse’s own benefit. They can take their own benefit early at age 62 and then switch to the survivor benefit when they reach full retirement age.

Otherwise, they can delay their own benefit until age 70 and collect the survivor’s benefit in the meantime. Then they can switch to their own larger benefit if that is bigger than the survivor’s benefit.

Drop in Overall Income/Loss of Income

The loss of one spouse can be hard to adjust to if that spouse was still working. The surviving spouse may need to go back to work to support themself, which may be challenging if their health isn’t the best or they have been out of the workforce for some years.

For example, take a couple where both spouses are in their late sixties and the husband was still working as a corporate executive. If he passes away, then his wife may be forced to rely on herself to make ends meet. And if she hasn’t had a job in the past few years, it may be harder for her to find sustainable employment.

The Pension Factor

Retirees who have a guaranteed pension can rely on this income while they are still living. But once the pension recipient is gone, the pension payout can go away, unless the recipient elected to get a survivor benefit for the spouse after their death.

Most survivor benefits for a pension are only about half of what the full benefit was, or even less in some cases. Surviving spouses need to be clear on how much they will get, if anything, after their spouse is gone.

Income Taxes

This is one area where surviving spouses may get some relief. Some surviving spouses may discover that they owe reduced taxes, or even no taxes, on their remaining income.

Say that a couple has a husband who dies while at a job paying $70,000 a year. The wife may find that her Social Security, survivor pension, and income from her retirement portfolio add up to less than her standard deduction (or itemized deductions if used instead). On the other hand, she may fall into a lower tax bracket than before, even if her income exceeds those amounts.

However, the surviving spouse’s filing status will also change after the death of the former spouse. The survivor can still file jointly for the year in which the spouse died. If the survivor is supporting any dependents, then they can file as a qualifying widower with dependent child for the next two years. After that, they can file as either single or head of household, depending upon their circumstances. In turn, that means a lower standard deduction and less favorable tax rates in many cases.

Tax rules for Social Security income for single filers say that up to 50% of Social Security benefits can be taxed if the filer’s modified adjusted gross income exceeds $25,000. If their income exceeds $34,000, then up to 85% of their Social Security benefits may be taxable.

Estate Planning Considerations

When it comes to the death of a spouse, it’s good for the survivor to request 15 to 20 certified copies of the death certificate so that they can retitle all their accounts and debt obligations to the survivor’s name only.

They will also need these copies to collect any life insurance benefits, remaining employee wages, and retirement plan benefits. Survivors should also keep detailed records of all of the calls they make to former employers, the Social Security Administration, and any IRA or retirement plan custodians in order to ensure that everything is processed correctly.

Bill Payment

If the deceased spouse paid all of the monthly bills, then the surviving spouse should find an organizing system, such as a multi-stack drawer, and put all of the monthly bills into it. That way they will be set to pay everything on time.

If bills are sent via email, it’s crucial for the surviving spouse to have access to their spouse’s email before they die. Then they can log in and keep up to date with any bills that are delivered only via email.

Survivors should also have their spouse’s logins and user IDs for all the accounts that are only open in their names. This way they can avoid having bills come due and past due that could have been easily paid.

Any subscriptions that were for only their deceased spouses can also be cancelled.

Life Insurance

If the deceased spouse had any type of life insurance, then the life insurance company should be contacted about the death benefit. Along with the death certificate, it’s also good to have the life policy or contract number to look up the policy with.

If this information isn’t handy, then the deceased’s Social Security number should be sufficient. The insurance company will typically offer a cash account that you can put the proceeds in until you have the chance to spend them.

These accounts usually pay low interest earnings. It might be to put the money over into your own bank, cash, or money market accounts, which can pay more interest.

Be Alert for Scams

Surviving spouses are particularly vulnerable to swindlers. This is especially true if any of the deceased spouse’s assets are required to go through the probate process.

Many unscrupulous predators try to collect “bills” from survivors for things that were never bought or borrowed. Sometimes these situations can come from family members!

Couples need to carefully review their debts and other obligations while both spouses are living in order to protect themselves from this type of crime.

Companionship and Loneliness

Not every issue is financial. One big downside to survivorship planning is the emotional toll that being alone can take on survivors. Those used to companionship for many years are suddenly thrust into the cold, unforgiving pit of loneliness.

This can open the door to a multitude of problems, such as extended periods of isolation. In turn, that can fuel alcoholism or other maladies that can be bad for the survivor’s physical and mental health. Children and caregivers should watch for these symptoms and take the necessary actions if they see it.

Individualized and group therapy can be helpful for those who suffer from these maladies.

Some Final Thoughts on Planning for Survivorship Scenarios

Losing a spouse can be one of the hardest things to adjust to in life. The financial ramifications of this loss can also be hard to deal with in many cases.

Survivors need to surround themselves with a reliable support group of friends and family that they can rely on to get them though this trial. Having a well-crafted financial plan can help with the tough details that must be covered when one spouse dies.

Consult your financial advisor for more information on what must be done to be prepared for survivorship situations. The steps that you take today can make a difference tomorrow.

What if you are looking for a financial professional to guide you now? Or perhaps you simply want assistance in a specific area or a second opinion of your existing retirement strategy. For convenience’s sake, many independent and experienced financial professionals are available at to assist you.

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