How do I make sure my spouse will have enough money after I pass?

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You likely have someone dependent on your income to live. While this is usually a spouse, it can also be an adult child, grandchild, or anyone else who relies on you for support. When you die, they are going to need something to replace your income, even if you are retired.

Retirement Income: Life Insurance Minimum

You likely have someone dependent on your income to live. While this is usually a spouse, it can also be an adult child, grandchild, or anyone else who relies on you for support. When you die, they are going to need something to replace your income, even if you are retired.

 

When a spouse dies, one Social Security check goes away 

Social Security is most retirees’ main income source. When a spouse dies, one Social Security check is also going to stop. 

If the couple are both claiming on one spouse’s earning record, with the other spouse getting half their check, the smaller check is going to go away.

For example, we have a couple Bill and Mary who receive $4,500 every month from Social Security. Bill’s check is $3,000 based on his earnings record. Mary claimed on Bill’s record as his spouse, so she receives $1,500 a month. (You can read more about Social Security spousal benefits here)

If Mary dies first, Bill will continue to receive his $3,000 check. If Bill dies first, Mary will start to receive the $3,000 check instead of the $1,500 one. In both cases though, they lose $1,500 in income they had coming in every month. 

If both spouses are claiming on themselves, the surviving spouse can also continue to get the larger check, but it is not automatic. 

For example, we have a couple Paul and Michelle. Both of them worked their entire lives, so they both claim Social Security on their own record. Paul is getting $3,000/month and Michelle is getting $2,500/month. 

If Paul dies first, Michelle can get Paul’s $3,000 check, but she has to apply for survivor benefits. She will still lose the $2,500 check.  If Michelle dies first, Paul will only receive his $3,000 check every month. 

Many people do not plan for this immediate loss on income when a spouse dies. When Social Security makes up a large piece of your monthly income, this can be a huge hit to the surviving spouse. 

When a spouse dies, their pension goes away 

Another large source of income for some retirees is a pension. 

If the deceased spouse was receiving a pension, there is a possibility this could go away as well. Many pensions have survivorship options that you can elect. 

In these cases, you can choose a single-life plan, which is where you get a larger check for your lifetime that stops when you die. 

You can also choose a joint-and-survivor plan. With this, your monthly check is reduced, but the check will continue to pay out to your spouse after you die. 

This decision is heavily reliant upon each couples age, health, and life expectancy, but whatever choice you made, you need to make sure you account for this in your plan for the surviving spouse. 

When a spouse dies, their paycheck goes away 

In today’s world, a lot of retirees choose to continue to work part-time or on the side. If the deceased spouse was still working, that is another immediate loss of income, much like Social Security. 

When one spouse dies, the bills stay the same 

We’ve already gone over how income can disappear when a spouse dies, but many people assume the cost is cut in half as well since you are only paying for one person. This is a false narrative. 

For most couples, the bills are going to remain around the same whether you are supporting one or two of you. The mortgage payments do not decrease, the utility payments don’t decrease significantly, and you still need to buy necessities. So how do you make sure the surviving spouse has enough to pay for all this? 

How do I fill the gap in income when a spouse dies?

Life insurance can fill the gap, specifically whole life insurance, which is life insurance that you cannot outlive. 

We recommend a minimum of $25,000 of whole life insurance to every person. You can see how we got to that number here, but know that this is only estimated to cover 6-12 months of the loss income.

Many people will need a little more than this to make sure they can keep paying the bills. 

Even if you have some health conditions and are in your 60’s, 70’s, or even 80’s, there are products out there that you can purchase to protect your loved ones and fill in the income gap after you pass. 

Cardinal can get you quotes and look into what you need to protect your spouse and loved ones. 

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How do I make sure my spouse will have enough money after I pass?

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Understanding the Upcoming 2026 Income Tax Increase: What You Need to Know

A Brief History of the Tax Cuts and Jobs Act (TCJA)

In today’s Cardinal lesson, we’re discussing the significant changes coming to income tax rates in 2026. This isn’t a proposal but a law already set in motion. The Tax Cuts and Jobs Act (TCJA), passed in 2017 and effective from January 1, 2018, brought about substantial reductions in income taxes. However, these reductions were only funded for eight years, meaning they will expire at the end of 2025.

What Changes to Expect in 2026

As of January 1, 2026, the tax rates will revert to their 2017 levels, adjusted for inflation. Key changes include:

  • The 12% bracket will increase to 15%.
  • The 22% bracket will rise to 25%.
  • The top rate of 37% will revert to 39.6%.

Not Just a Proposal

It’s crucial to understand that this change is already the law. Many people mistakenly believe that the tax rate increases are still under discussion. However, unless Congress enacts new legislation, these higher rates will take effect as scheduled.

Implications for Your Financial Planning

Impact on IRAs and 401(k)s

With the current lower tax rates, now is the time to consider strategies like Roth conversions. By converting funds from a traditional IRA to a Roth IRA now, you can potentially save a significant amount in taxes over the long term.

Why Planning Ahead is Crucial

For individuals with substantial retirement savings, understanding these changes is vital for effective tax planning. The window to take advantage of the current lower tax rates is closing, and planning ahead can make a significant difference.

Case Studies and Planning Opportunities

Hans Scheil and Tom Griffith discuss specific case studies and planning strategies in our latest video. These examples illustrate how different scenarios can be managed effectively:

  • Case Study 1: A married couple with an adjusted gross income of $150,000 in 2024 can convert part of their IRA to a Roth IRA, taking advantage of the lower current tax rates.
  • Case Study 2: High-net-worth individuals with large IRAs can save substantial amounts in taxes by planning conversions over the next two years.

Estate Tax Considerations

The TCJA also doubled the estate tax exemption, which will revert in 2026. This change can significantly impact high-net-worth individuals, making estate planning more crucial than ever.

Action Steps to Take Now

  • Review Your Current Tax Situation: Analyze how the upcoming changes will affect your finances.
  • Consider Roth Conversions: Take advantage of the lower tax rates before they expire.
  • Plan for Estate Taxes: Assess your estate plans in light of the changing exemptions.

Conclusion

The changes coming in 2026 are significant, but with proper planning and informed decision-making, you can navigate these changes effectively. Watch our video for more detailed insights and personalized advice.

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Contact us today with any questions, concerns, or just to stay connected.

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