Key Takeaways
- Widowhood has major impacts on a surviving spouse’s personal finances.
- There are three stages of widowhood: grief, growth, and grace.
- Advance preparation before either spouse dies will make things easier for the survivor.
- The lower of a couple’s two Social Security checks goes away upon widowhood.
- Surviving spouses must file taxes as singles starting the year after their spouse’s death.
One of the most life-changing events that people experience is becoming a widow or widower. Not only are their personal finances affected, but they lose their life partner, cheerleader, and traveling companion, their deceased spouse’s knowledge and skill sets, and the couple’s future together.
There are about 11.8 million widowed persons in the U.S. with approximately 2,800 more added each day. The average age of widowhood in the U.S. is 59, with widowhood most prevalent among older adults. About 1 in 7 widowed persons (14.8%) live in poverty according to Social Security data.
This article describes strategies to prepare for widowhood (e.g., organized financial records and up-to-date legal documents) and 14 financial impacts including Social Security, income taxes, and changes in household expenses.
Types of Widowhood
Widowhood can be an instant change (fatal heart attack or fall, massive stroke, auto accident) or a prolonged process (declining health in a nursing home, dementia, terminal disease). A key factor to consider is how long it could last (i.e., the life expectancy of the surviving spouse). Among older adults, widows outlive their husbands by 12.5 years and widowers outlive their wives by 9.5 years.
Three Financial Stages of Widowhood
Three financial stages of widowhood are:
- Grief: In shock by the death of spouse, often with “foggy brain,” and a time to seek help (e.g., filing for benefits, contacting income payors, and settling the estate)
- Growth: More clearheaded and ready to move forward with a focus on cash flow, housing, investments, taxes, and retirement/estate planning
- Grace: A transformational stage where survivors embrace their new life and financial realities
Preparing for Widowhood
The best time to prepare for widowhood is before a spouse dies. Recommended practices include:
- Review the sources and amount of each spouse’s survivor’s income
- Estimate how expenses could change as a result of widowhood
- Create a projected budget for each spouse as a survivor
- Prepare a net worth statement (assets minus debts) and a digital assets inventory
- Review life insurance coverage and investment and retirement plan statements
Changes in Social Security
One of a couple’s Social Security checks goes away upon widowhood. Surviving spouses receive the higher of their survivor benefit (based on the deceased spouse’s earnings) or the benefit based on their own work history.
Example: if John and Jennifer have $2,200 and $1,400 benefits, respectively, and John passes away first, Mary will receive John’s $2,200 benefit because it is higher than her own. If Mary dies first, John will retain his $2,200 benefit. Either way, household income is reduced by $1,400.
Changes in Retirement Savings Plans
If the deceased spouse had an individual retirement account (IRA) or employer retirement account (e.g., 401(k) and 403(b) plan), the surviving spouse can roll over the account to his/her name and take required minimum distributions (RMDs) based on his/her life expectancy. This is the most commonly used strategy.
Surviving spouses can also establish an inherited retirement account or leave assets in the deceased’s 401(k) or 403(b) plan. RMD rules apply and withdrawals are taxed as ordinary income.
Changes in Pension Benefits
If the retired employee who had a pension dies first, the surviving spouse is typically entitled to a percentage (e.g., 55%) of the earned benefit. If the non-employee spouse dies first, the benefit reduction for a joint annuity may stop, resulting in a full unreduced benefit for the pensioner.
Refer to the summary plan description (SPD) for the pension plan for specific details.
Permanent Income and Benefit Decreases
Income reductions upon widowhood include loss of a spouse’s paycheck or self-employment income, loss of a Social Security check, reduction of pension income, and a possible reduction in savings or investment income if money is withdrawn to cover final expenses. If the deceased spouse was working or retired with benefits, the survivor may lose employer-paid employee or retiree health insurance.
Permanent Income Increases
Increased pension income may occur if a retired employee is the survivor and a full benefit is restored. Interest, dividend, and capital gains income may increase if life insurance proceeds, profit from the sale of a house, and/or sale of a deceased spouse’s possessions are invested to produce income.
One-Time Cash Infusions
Several one-time income sources for a surviving spouse are life insurance, sale of the deceased spouse’s car, boat, golf cart and /or other valuable possessions, an insurance premium refund for property that is sold and no longer insured, and profit on the sale of a home, if downsizing.
Decreased Expenses
Household expenses that often decrease after widowhood include food at home, restaurant meals, gas, insurance, and maintenance expenses if a car is sold, travel and entertainment, and housing expenses and utilities, if downsizing.
New Expenses
New expenses for widowed persons may include lawn care, financial planning and tax preparation services, transportation (e.g., a driver to the airport) and handyman services, and professional “check-in” or alert services for a surviving spouse living alone.
Loss of Economies of Scale
Economies of scale occur when a married couple can share or combine resources, thereby reducing the average cost of living per person. Upon widowhood, they go away.
Examples include an inability to split household chores and errands, smaller food packages (to avoid spoilage) with a higher unit price, and “single supplement” charges for cruises and overnight bus trips.
Change in Income Tax Filing Status
One of the steepest tax increases in the U.S. tax code is the shift from married filing jointly to single tax filing status for widowed taxpayers (a.k.a., the widow’s penalty). As a result, newly single taxpayers reach each tax bracket at a far lower income range than a couple filing jointly. The 12% tax bracket to 22% is the biggest jump in the tax code.
Filing taxes as a single individual can also trigger taxes on Social Security benefits, the IRMAA Medicare premium surcharge, and the net investment income tax (NITT). Surviving spouses can file a final income tax return as married filing jointly for the year of their spouse’s death.
Estate Tax Implications
Most people don’t pay federal estate taxes because the estate and gift tax exclusion is very high (in 2025, $13,990,000 and $15,000,000 in 2026). Nevertheless, a deceased person’s executor should still file an estate tax return if the estate value is below the exemption. By doing so, the surviving spouse can have the deceased’s unused exemption added to his or her own. This is called portability.
Housing Decisions
Following widowhood, some people re-consider where they live, both the size of their housing unit and its geographic location. To quote the band The Clash, the key question is “should I stay or should I go?
Reasons to Stay: Family and friends nearby, community connections, better weather in southern states, and no state income tax in nine states (AK, FL, NV, NH, SD, TN, TX, WA, and WY).
Reasons to Move: Fear of aging alone without family nearby, better weather and lower taxes, and inability to afford a previous lifestyle on the survivor’s income alone.
Other Financial Impacts
The auto insurance premium on the surviving spouse’s car may increase because some insurers view single drivers as more accident prone than married drivers. This is not an intentional penalty for being widowed, but rather the result of how insurers assess risk and the loss of a multi-car discount.
Also, credit cards can be cancelled if the surviving spouse was an authorized user on their deceased spouse’s account instead of an account co-owner.
Solo Aging
When one spouse in a married couple without children passes away, the survivor become a “solo ager.” Special challenges include naming a primary and contingent power of attorney agent and healthy care proxy for a living will and assistance with errands, chores, and medical appointments.
Widowhood is never easy and there is no one “right” way to grieve. It is okay to set your own timetable and take your time with major decisions like selling a home, moving, gifting assets, and making investment decisions. Focus initially on urgent tasks and seek professional advice, if needed.
