Most married couples plan their retirement income together. They look at their combined Social Security, their combined pensions, and their combined required minimum distributions, or RMDs, and they build a plan around two people sharing the load. What often gets missed is what happens when one spouse passes away and the surviving spouse is left to manage the same income, alone, at a much higher tax rate.
This is sometimes called the widow’s tax, and it can catch families off guard at exactly the moment they’re least prepared to deal with it.
Here’s how it works. Once you reach age 73, the IRS requires you to start taking RMDs from traditional IRAs, 401(k)s, and similar retirement accounts. When both spouses have their own retirement accounts, each one takes RMDs based on their own balance. As a married couple filing jointly, those combined RMDs are taxed using the more favorable married filing jointly tax brackets.
Then one spouse passes away. The surviving spouse still owns both sets of retirement accounts, often through inheritance, and in many cases still must withdraw roughly the same total RMD amount the couple withdrew together. But now that income is reported on a single tax return, using single filer tax brackets, which are considerably less generous. The result is that the same dollar amount of income can push the surviving spouse into a noticeably higher tax bracket, all while they’re also managing the loss of their spouse and possibly a reduced Social Security benefit.
It’s a painful combination. The income doesn’t go down nearly as much as people expect, but the tax bill goes up.
What can you do about it?
One of the better strategies is to start drawing down retirement accounts earlier than the IRS requires, while both spouses are alive and filing jointly. If you retire in your early sixties but won’t be required to take RMDs until 73, that gap is valuable. Withdrawing some retirement funds during those years, even though you don’t have to yet, can mean paying taxes on that income while you’re still in a lower bracket as a couple, rather than waiting and risking a larger tax bill for the survivor later. This might include modest annual withdrawals, partial Roth conversions, or simply being intentional about which accounts you draw from first.
It is not a one size fits all answer. It depends on your account balances, your income sources, your age difference as a couple, and your overall financial picture. But the earlier you start thinking about it, the more options you have.
This is exactly the kind of issue that’s easy to overlook until it’s too late to plan around it. Most people don’t think about the tax brackets their spouse might face one day on their own. It’s not a comfortable topic, but it’s an important one.
If this sounds like a conversation you’ve been meaning to have, or if you know someone who recently lost a spouse and is now navigating retirement income on their own, we’d encourage you to reach out. At Hemingway and Buchanan CPAs, we work with families to look at the full picture, not just this year’s taxes, and help build a plan that accounts for what happens down the road, not just where things stand today.
You don’t have to figure this out alone, and you don’t have to wait until it becomes a problem to start asking questions.
This article is for general informational purposes and is not intended as personalized tax advice. Current RMD rules, including the age 73 requirement, are set by the IRS and detailed in IRS Publication 590-B. Every situation is different, and we recommend speaking with a qualified advisor about your specific circumstances.