Love or Money?
A widowed person's decision to remarry shouldn’t involve only the heart, because the choice could have financial implications for life
Losing a spouse to death is a traumatic and life-altering event. Widows and widowers initially feel an overwhelming sense of loss and loneliness, but eventually some decide to find love again. According to a study led by a UC San Diego psychiatrist, 61% of men and 19% of women who lost a spouse were either involved in a new relationship or remarried within 25 months.
The decision to remarry after widowhood is a complex one and many things need to be taken into consideration, especially how it will affect your financial future.
"How remarriage will financially affect you as a widow or widower depends on your age, pension plan and tax status."
"This is a big topic that casts many shadows and there are many considerations," says Robert Barnett, attorney, CPA and founding partner with Capell Barnett Matalon & Schoenfeld LLP, a law firm in New York that helps people with estate, tax and financial planning. "Every single week we see clients who are contemplating entering into a new marriage after the loss of a spouse."
Main Considerations
Jim Schwartz, senior advisor for Strategic Wealth Advisors in Scottsdale, Arizona, says he was receiving so many questions regarding the financial aspects of widowhood that he developed a checklist to help clients navigate the first two years.
"How remarriage will financially affect you as a widow or widower depends on your age, pension plan and tax status," he says.
Schwartz offers these general guidelines for different benefits:
- Social Security — After the age of 60 (or 50, if disabled), surviving spouses are eligible to collect a survivor benefit. If they are not over the age of 60 but are caring for a child under the age of 16, they are also eligible to receive Social Security survivor benefit. Depending on their age, the ages of any children and marital status, survivors can receive from 100% to 71½% of the deceased spouse's benefit.
If a widow or widower remarries before the age of 60 (age 50 if you have a disability), you cannot receive benefits as a surviving spouse while you are married. If you remarry after age 60 (age 50 if you have a disability), you will continue to qualify for benefits on your deceased spouse's Social Security record. If you remarried prior to age 60 (50 if you have a disability), death or divorce of the current spouse will once again make you eligible for survivor benefits from the prior deceased spouse. More information can be found on the Social Security website.
- Military Benefits — Qualified military personnel receive a life-long pension when they retire, but the pension stops when the veteran dies. However, while still on active duty, vets can buy a Survivor Benefit Plan (SBP), which pays a beneficiary — usually a spouse — a maximum of 55% of the military member's retired pay. If a surviving spouse remarries before age 55, he or she loses SBP eligibility. If that marriage ends in death, divorce or annulment, SBP eligibility is reinstated.
Surviving spouses and dependent children may also be eligible for Dependency and Indemnity Compensation (DIC) if the veteran dies of service-connected causes. The program, run by the Department of Veterans Affairs (VA), covers deaths after retirement if the cause of death is due to an injury incurred or disease contracted while on active duty.
- Private Pensions — Schwartz says these may be taken away if you remarry at any age. "This is definitely something to look at in each pension plan and make sure you understand," he said. The Pension Benefit Guaranty Corporation, a federal government agency, offers some tips on keeping track of private pensions.
- Federal Pensions — Schwartz says these are even more complicated than private pension plans. "If you remarry prior to age 55, you may lose the pension; you should really dig into the rules and caveats of each plan," says Schwartz. Information on federal pensions can be found on Benefits.gov and the Office of Personnel Management website.
"As you can see, there are many rules and caveats to each retirement plan," says Schwartz. "Many of these situations and scenarios require some analysis and planning. Most widows and widowers should consider getting some level of analysis or planning from a qualified financial advisor before making certain irrevocable decisions."
A Couple Weighs Options
Anna Johnson, 67, and Jerry Schirmer, 65, have been dating a few months. Both have lost their spouses. Schirmer says they are in a committed relationship but take the view of many late life partners.
"We really don't see the benefit of the physical contract of marriage."
"We really don't see the benefit of the physical contract of marriage," says Schirmer. "We are in a committed relationship; legal marriage is something more for young couples starting a family."
Johnson says remarriage would be a financial hit for her, as she would lose her late husband's pension. "There are also tax considerations," she adds.
Protecting your income is only one part of the equation when deciding to remarry after widowhood. One important factor includes how remarriage will affect your tax bill.
For lower-income earners, for example, adding a spouse's wages could lift the total household income above the maximum allowed to qualify for the Earned Income Tax Credit. In the 2022 tax year, the EIC ranges from $560 to $6,935, depending on income and family size.
"For most working single people, widows included, there is no tax penalty for getting married."
"However, for most working single people, widows included, there is no tax penalty for getting married unless they are very high earners," explains Schwartz.
Schwartz adds widows receiving survivor benefits from Social Security may be taxed on some benefits if their "combined income" — Social Security benefits and pay from a job, for example — exceed $25,000 ($32,000 if they remarry and file a joint return).
Other things to take into consideration include the Net Investment Income Tax, Medicare surtax and state and local taxes, says Schwartz.
IRAs are also a consideration. "If a partner has a large IRA and plans to designate you as the beneficiary, marrying them can provide better inherited IRA options than not marrying them," says Schwartz.
Estate Planning and Health Directives
If you decide to remarry, Barnett advises you to look at all of your current estate plans, wills, trusts, beneficiaries, powers of attorney and health care directives.
"The number one thing we see in our practice are people trying to avoid conflict with their families, particularly their respective children," says Barnett. "People typically want to ensure their children from their previous marriage receive the money or real estate acquired during that marriage."
"The number one thing we see in our practice are people trying to avoid conflict with their families."
Barnett adds even if people decide not to marry and they want to protect their new partner in the event something should happen to them, they should draw up agreements.
"They may have an agreement drawn up (saying) their partner can remain in their home for a specified amount of time," says Barnett. "It should include everything, including who has right to burial."
Barnett says it is especially important to communicate with family as well and make your wishes known.
Johnson has children, as well as stepchildren from her deceased husband and Schirmer also has children. Both have taken steps to protect their respective family's inheritances. "If I enter into a committed relationship, we'll also take action to protect each other," says Johnson.
