When a spouse dies, it’s not just the emotional toll that can shake a household. For many widows and widowers, the financial hit is equally devastating — and it often comes from a surprising place: Social Security.
Unless you know the rules, the death of a spouse can slash household income by 30% to 50%. Even worse, that drop in income is often paired with a tax increase. It’s a one-two punch known as the widow’s penalty — and most people don’t see it coming.
These kinds of oversights aren’t rare. In fact, they’re far more common than most people realize.
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Survivor benefits come with complicated rules, and many widows are never told they have better options.
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Here’s one example of how much it can cost.
How Diane discovered she was eligible for higher benefits
At a recent Social Security workshop, I met a woman named Diane. She was 75, widowed and had been collecting her own Social Security benefit for more than a decade.
Like many widows, she assumed the amount she received each month was simply what she was entitled to.
But after the session, Diane asked a few follow-up questions and discovered that she was actually eligible for a much larger survivor benefit based on her late husband’s record — something she’d never been told.
She had been receiving just over $1,000 per month, but her survivor benefit should have been closer to $2,400 per month — an increase of $1,400 per month, or $16,800 per year.
Over her expected lifetime, that difference totaled more than $213,000.
The bad news? She missed out on more than $84,000 in income from ages 70 to 75. The good news? By uncovering this opportunity and making the switch, she walked away with an extra $1,400 per month in benefits — adjusted for inflation — for the rest of her life.
A study from United Income found that retirees are collectively leaving over $3.4 trillion on the table by claiming benefits at less-than-optimal times. Only 4% of Americans file at the ideal time, according to the study.
That means 96% are missing out — and widows are especially vulnerable.
Step No. 1: Plan ahead for Social Security survivor benefits
Widowhood is a certainty for most couples. When one spouse dies, income drops dramatically, but the tax bracket often doesn’t.
The surviving spouse goes from filing jointly to filing as a single taxpayer — a shift that can push them into a higher bracket and chop their standard tax deduction in half, even as their income falls.
The result? A widow may suddenly owe more in taxes on less income, especially with required minimum distributions or Medicare surcharges. And if that income was dependent on the higher Social Security benefit, the cut can be devastating.
That’s why married couples need to think ahead. Who has the higher benefit? Will it make sense to delay claiming to maximize the survivor benefit?
I once spoke with a 72-year-old man named Jerry who regretted claiming at full retirement age instead of waiting until 70.
He didn’t need the money then, but didn’t realize his choice would reduce the survivor benefit his wife will one day rely on — by $1,700 a month. That’s a $204,000 difference over 10 years.
Step No. 2: Avoid the most common Social Security mistakes for widows and widowers
Most claiming mistakes come from three issues:
- It’s too complicated. With over 500 possible filing combinations for couples, people often copy what someone else did, unaware that every household is different.
- Social Security can’t give advice. The agency reps aren’t allowed to offer personalized guidance. They can process a request but not help you optimize it.
- Many advisers skip it. Because most advisers aren’t paid for Social Security planning, they focus on other areas — but failing to optimize benefits can derail a good plan.
Understanding the survivor benefit rules is critical. A widow can claim as early as age 60 (or 50 if disabled) and may switch between her own benefit and the survivor benefit.
If you don’t know that option exists, you may never take it — and that can mean losing out on six figures.
Step No. 3: Run the numbers to optimize Social Security survivor benefits
Too many people treat Social Security like a simple yes-or-no question. But the smartest approach is to model different scenarios.
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What happens if one spouse takes Social Security early and the other delays? What’s the impact on survivor benefits? On taxes? On drawdowns from savings?
I recommend a three-step planning process:
- Organize your puzzle pieces. Know your retirement income sources, how they’re taxed and when they’re available.
- Take your household status into account. Whether you’re married, divorced, widowed or single, your strategy depends on your status.
- Model the trade-offs. Run the math. The difference between Strategy A and Strategy B could be six figures.
Widows and widowers are especially at risk of making costly mistakes because survivor benefits can start early and be switched later — but only if you know the rules. Many don’t.
That’s why Diane almost lost over $200,000. And why Jerry’s wife will receive a smaller check for the rest of her life.
Social Security is too important to get wrong. When the time comes, aim to be in the 4% who get it right. Because when you lose your partner, the last thing you should lose is your financial confidence.
This information is for educational purposes only and does not constitute individualized financial, tax, or legal advice. Please consult a qualified professional regarding your specific situation.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.