Widow's Penalty: Tax Trap for Survivors
Durham News Today | 2 Min News | The Daily News Now! · The Daily News Now!
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Show Notes
A looming wealth transfer of $124 trillion from baby boomers to heirs, with $54 trillion going to widowed spouses, predominantly women, reveals a harsh tax code issue: the widows penalty. This penalty slams survivors with higher taxes, steeper Medicare costs, and less Social Security income. After a spouses death, survivors face halved standard deductions, squeezed tax brackets, and potential Social Security income cuts by 40%. Medicare premiums also rise, and required minimum distributions from retirement accounts do not decrease. Couples can mitigate these issues by planning ahead, modeling survivor taxes, choosing joint pension survivor benefits, and gradual Roth conversions.
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