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Many retirees worry about how threats like inflation, living longer or market volatility could impact their nest egg.
But one risk — higher expenses, including taxes after a spouse dies — could be less costly than expected, according to certified financial planner Cody Garrett, founder of Measure Twice Planners in Houston.
The issue, known as the “survivor’s penalty,” impacts some couples when filing status shifts from married filing jointly to single, which means the widow or widower has a smaller standard deduction and compressed tax brackets.
But many surviving spouses fail to see their complete financial picture, and “automatically assume that nothing is changing except for filing status,” said Garrett, who is also co-author of the book, “Tax Planning To and Through Early Retirement.”
For 2026, the standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers. Taxpayers age 65 and older get an extra standard deduction of $1,650 per spouse or $2,050 for single filers.
President Donald Trump‘s “big beautiful bill” also added a temporary senior “bonus” deduction of up to $6,000 per individual ($12,000 for married couples filing jointly) through 2028, with certain income limits.
Whether filing single or together, these tax breaks can significantly reduce an older American’s effective tax rate, or taxes paid as a percentage of total income.
Surviving spouses can file jointly in the year of their partner’s death, as long as they don’t remarry. After that, they can file as a qualifying surviving spouse for up to two years if they have a dependent child.
Brackets are based on “taxable income,” which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
When the survivor’s penalty ‘hits hardest’
For single filers, the survivor’s penalty can impact couples with different life expectancies, financial experts say.
In 2024, there was a nearly 5-year life expectancy gap between the sexes, according to the latest data from the Centers for Disease Control and Prevention. The life expectancy was 81.4 years for females and 76.5 years for males in 2024.
“The penalty hits hardest when income stays high after a spouse dies,” said CFP Britton Williams, a senior wealth advisor with Calamita Wealth Management, based in Raleigh, North Carolina.
But “couples with similar incomes, modest savings or assets already in Roth accounts tend to feel less of a sting,” he said.
Withdrawals from pre-tax retirement accounts incur regular income taxes, whereas Roth funds generally are tax-free. Typically, retirees must start required minimum distributions, or RMDs, from pre-tax accounts at age 73.
How cash flow changes for survivors
When comparing expense projections between a married couple and a surviving spouse, you need to consider how cash flow will change, said Garrett with Measure Twice Planners.
Some survivors could see lower income and expenses after a spouse dies. For example, Social Security retirement benefits could decrease and pensions could stay the same. Meanwhile, medical expenses typically fall, while household expenses could be similar.
For pre-tax retirement accounts, a younger surviving spouse may have smaller RMDs because the required withdrawal percentage typically increases with age, Garrett said.
Plus, there’s a benefit for survivors who inherit a taxable brokerage account. Depending on the state, they’ll receive a partial or full “step up in basis,” which adjusts the assets’ original purchase price to market value upon the spouse’s death.
“The step up in basis is so underappreciated,” because it can significantly decrease capital gains taxes if the survivor later sells the assets, Garrett said.
