This article was originally published in the October 2026 edition of the Traverse City Business News.
Most financial plans are built around two people sharing income, decisions, and responsibilities. When one spouse passes away, those responsibilities often shift quickly to one person, usually during a period of grief and uncertainty.
For retirees with large IRAs, taxable investment portfolios, real estate, or business interests, the financial impact can extend well beyond a reduction in monthly income. Taxes and Medicare premiums may change, while investment and estate decisions that were once shared become the responsibility of one person. Understanding these changes ahead of time can help couples prepare and help surviving spouses avoid costly mistakes.
Know Which Social Security Benefit Continues
One of the first financial changes many surviving spouses face involves Social Security.
A surviving spouse cannot continue receiving both Social Security benefits. In many cases, the survivor continues with a benefit based on the higher earnings record, while the other monthly benefit ends. The amount received can depend on the survivor’s age and claiming history, but household income will typically decline.
Before that happens, couples should understand:
- Which Social Security benefit would continue
- Approximately how much household income would be lost
- Whether investment assets would need to help replace that income
- How the change could affect monthly spending plans
It’s also important to know that survivor benefits typically cannot be claimed online. The surviving spouse may need to contact Social Security directly by phone or through a local office.
Lower Income Can Still Mean Higher Taxes
Many widows and widowers are surprised to learn that a lower household income does not always mean a lower tax bill.
A surviving spouse can generally continue filing jointly during the year a spouse dies. After that, many individuals file as single taxpayers unless they qualify for another filing status. Single tax brackets reach higher tax rates at lower income levels than married filing jointly brackets, which can create an unexpected tax burden.
This issue matters most for retirees with large traditional IRAs, required minimum distributions, pension income, taxable investment accounts, or deferred compensation plans.
Even if total income decreases, more of it may be subject to higher tax rates. Reviewing Roth conversion opportunities, charitable giving strategies, and withdrawal plans before filing status changes may help reduce future taxes.
Why Medicare Premiums May Change
Medicare costs can also change after the loss of a spouse.
Higher-income retirees may pay Income-Related Monthly Adjustment Amounts, or IRMAA, on Medicare Part B and Part D premiums. Because IRMAA thresholds are lower for single taxpayers than they are for married couples filing jointly, a surviving spouse can end up paying higher premiums despite having less household income.
Medicare typically uses tax information from two years earlier when determining premiums. However, the death of a spouse is considered a life-changing event that may allow Social Security to use more current financial information when evaluating premium adjustments.
For someone recently widowed, reviewing Medicare premiums and confirming that they reflect current circumstances may help avoid unnecessary costs.
Does the Investment Portfolio Still Fit?
If one spouse has historically managed the investments, the surviving spouse may have an investment portfolio that no longer fits their needs.
The surviving spouse may have different income needs, a different risk tolerance, or less interest in managing complex investments. Accounts may have also accumulated across multiple institutions over several decades, making ongoing management more difficult than necessary.
After a spouse’s death, it may be worthwhile to evaluate whether the portfolio should be adjusted to:
- Generate the income the surviving spouse needs
- Reduce unnecessary complexity
- Consolidate accounts where appropriate
- Improve access to cash reserves
- Simplify investments without creating unnecessary taxes
Major changes should not be rushed. Important financial decisions are often best made after carefully evaluating long-term goals, tax consequences, and cash flow needs.
Make Sure the Survivor Can Access What They Need
One of the most overlooked aspects of financial planning is organization.
Working with an experienced financial advisor who acts as a fiduciary can help coordinate the investment, income, tax, and estate decisions that may follow a spouse’s death. That relationship works best when both spouses know and trust the advisor, not only the spouse who typically leads the financial decisions.
For many Northern Michigan families, substantial wealth may be held in a primary home, cottage, land, or business interest. Those assets are valuable but may not provide the cash a surviving spouse needs for living expenses, property costs, taxes, and professional fees while accounts transfer and estate matters are handled.
Both spouses should understand where financial accounts are held, how assets are titled, where estate planning documents are stored, and who to contact for legal and tax assistance. They should also know where to find current beneficiary designations and insurance information.
The same organizational work matters for someone who is already managing finances alone. A durable financial power of attorney should identify who can act on their behalf, and that person should know where accounts and documents are located and which professionals to contact.
5 Questions to Answer Now
- How much income would continue if one spouse passed away?
- Is enough cash available for short-term needs?
- Which assets would be difficult for one person to manage?
- Does the surviving spouse know where the accounts and important documents are located?
- Is there a trusted fiduciary advisor who understands the full financial picture and can help coordinate the decisions that follow?
Test the Plan Before It Is Needed
The loss of a spouse can change Social Security income, taxes, Medicare premiums, investment management, and access to assets in ways that are not immediately obvious.
Ask your financial advisor to model how the plan would change following the death of either spouse, including how much income would be lost, how taxes and Medicare costs could change, which assets would be immediately accessible, and what decisions the surviving spouse would need to make.
If one spouse is less familiar with the financial plan, include them in the next meeting. A plan designed for two should also be understandable and workable for one.
If you’d like to learn more about how we help families navigate financial decisions with clarity and confidence, we invite you to explore our approach or reach out for a conversation.
